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Industrial Production Falls Sharply in Euro area

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Industrial Production Falls Sharply in Euro area

Industrial output in the euro area registered its steepest decline in more than a year, as the struggling currency bloc continues to cope with an uneven recovery.

Industrial production declined 1.1 percent in October and at an annualized rate of 0.2 percent, according to official estimates from the European Commission. Analysts polled by Reuters forecasted a gain 0.3 percent in October after a revised 0.2 percent decline the previous month.

Output in the energy and durable consumer goods sectors declined for the fifth time in the last six months. Energy production fell 4 percent in October after a 1.5 percent gain the prior month. Durable goods fell 2.4 percent after a 1.5 percent drop in September. Capital goods and nondurable consumer goods fell 1.3 percent and 0.9 percent, respectively. The lone industry to report gains in October was intermediate goods, which rose 0.4 percent.

Ireland’s industrial sectors were the hardest hit in October, declining 11.6 percent after a 2.2 percent hike in September. Production levels fell 1.2 percent in Germany, 3.5 percent in the Netherlands, 0.9 percent in Greece and 0.8 percent in Spain.

“Industrial production figures clearly highlight the bumpy and fragile nature of the Eurozone’s economic recovery,” said Martin van Vliet of ING. “With Eurozone growth seemingly stuck in low gear disinflationary pressures will persist, thereby keeping the possibility of further ECB action very much alive.”

Although the euro region officially exited recession in the second quarter, disinflation has prompted the European Central Bank to consider more drastic measures to stimulate the economy. Introducing a negative deposit rate is one policy tool the ECB has been considering, according to several reports. The ECB unexpectedly slashed interest rates to a record low of 0.25 percent in November in reaction to the slowest pace of inflation growth in four years.

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