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Softness in European Industrial Production

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Softness in European Industrial Production

Spanish Industrial Output data has just been released for February. The year on year figure is showing a further expansion of 2.8% versus a January reading of 1.1% and a consensus estimate of 1.7%.

This follows on from some soft figures from Germany earlier this morning. These showed a month on month pick up of just 0.4% against a prior of 0.7%, the year on year version is still running at a healthy 4.8% however this was down slightly from last months 4.9% reading.

Despite sluggishness in the outskirts of the Eurozone, the core lead by Germany is undergoing a measurable growth spurt. Falling unemployment and rising consumer and industrial activity particularly in the construction sector are keeping Germany’s recovery on track. This is being further fuelled by low interest rates and now the prospect of further ‘unconventional’ monetary easing activities by the European Central Bank.

The Euro has this morning revisited the $1.36’s for the first time since February. This will take some pressure off the ECB who had been predicting that international trade would provide some fuel for the Eurozone recovery. However the consistent appreciation of the single currency had been diminishing the potential for a trade lead return to growth. To counter this ECB governors have recently begun announcing that they are not in a position to tolerate an overpriced currency at this stage in the recovery.

It has been unclear as to what actions the ECB would be prepared to take in order to temper the rise of the Euro, it now seems that the currency is happy to provide this respite of it’s own accord. The pressure is off the ECB, at least in so far as the exchange rate is concerned, this will provide some breathing space to enable more focus on the price stability problem.

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