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Eurozone Industrial Production Slows

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Eurozone Industrial Production Slows

Eurostat has just released details of the February Industrial Production data. Year on year this reading is 1.7% which is down on last months 2.1% but easily beat the consensus estimate number of 1.5%. The short term trend is however positive, month on month this reading is 0.2% which is stronger than the January number of -0.2%, it also beats 0.2% which was the forecast estimate for this statistic.

Industrial Production has a tendency to be correlated with inflation, increasing output is designed to match a demand pick up from increased economic activity. As such, given the Eurozone’s precarious inflation situation, this months Industrial Production figures are taking on a slightly elevated importance.

Falling inflation in the Eurozone, as once again evidenced by last week’s data, is becoming a serious concern, not just for the European authorities but now it is also attracting global attention. Last week the US Treasury Secretary, Jacob Lew, publicly warned the European Central Bank of the impending deflationary crises. America’s Finance Minister stated that “More needs to be done to support growth and guard against further disinflation in the euro area” he also noted that he was “concerned by inflation rates consistently below target and weak demand.”

It was probably unnecessary for the US to draw the ECB’s attention to the impending deflationary crises, the Bank is already under considerable pressure to take measures to address the situation. The mounting frustration of Europe’s trading partners is however somewhat understandable. The interwoven nature of global economics means that recovery in US is influenced by the speed and strength of the recovery in those areas that it does business. The fractured nature of the Eurozone economy makes the ECB appear to be over cautious to outsiders, it is easy for the US Treasury Secretary to ignore the politics a central bank must deal with in trying to please 18 separate nations, it is however a timely reminder to the ECB not to be too cautious.

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