Back
14 Jan 2016
Eurozone: Industrial production weakens - ING
FXStreet (Delhi) – Teunis Brosens, Senior Economist at ING, notes that Eurozone’s hard data has failed to keep up with optimistic PMIs.
Key Quotes
“November Eurozone industrial production disappointingly decreased by -0.7% MoM in November, resulting in a meagre 1.1% YoY increase. Unsurprisingly given the warm winter weather, the energy sector is doing particularly poorly at -2.8% YoY, but other sectors are not doing very well either.
German industry is actually underperforming the Eurozone average at -0.3% YoY, as Germany is particularly hit by the slowdown in China and other emerging markets. French industry in contrast is doing better at +2.8% YoY. Interestingly, this is a different story from the one told by PMIs, which show the German manufacturing PMI still ahead of the French one. But the discrepancy between ‘soft’ PMIs and ‘hard’ industrial production data extends further: while the Eurozone manufacturing PMI reached its highest value in December since April 2014, industrial production data has essentially been moving sideways throughout 2015.
We therefore have some trouble believing the positive picture painted by Eurozone industrial PMIs. New orders for manufacturing goods, separately measured by the ECB, confirm that not all is well. New orders recovered somewhat in October but are still 3.6% lower than the peak reached in mid-2015. It is no surprise to see weakness primarily located outside the euro area in recent months (+1.3% YoY). In contrast, new order intake from within the Eurozone is holding up well, up +4.7% YoY. It remains to be seen, however, whether strengthening Eurozone demand will remain able to compensate for weakness elsewhere in the world economy in the months ahead.”
Key Quotes
“November Eurozone industrial production disappointingly decreased by -0.7% MoM in November, resulting in a meagre 1.1% YoY increase. Unsurprisingly given the warm winter weather, the energy sector is doing particularly poorly at -2.8% YoY, but other sectors are not doing very well either.
German industry is actually underperforming the Eurozone average at -0.3% YoY, as Germany is particularly hit by the slowdown in China and other emerging markets. French industry in contrast is doing better at +2.8% YoY. Interestingly, this is a different story from the one told by PMIs, which show the German manufacturing PMI still ahead of the French one. But the discrepancy between ‘soft’ PMIs and ‘hard’ industrial production data extends further: while the Eurozone manufacturing PMI reached its highest value in December since April 2014, industrial production data has essentially been moving sideways throughout 2015.
We therefore have some trouble believing the positive picture painted by Eurozone industrial PMIs. New orders for manufacturing goods, separately measured by the ECB, confirm that not all is well. New orders recovered somewhat in October but are still 3.6% lower than the peak reached in mid-2015. It is no surprise to see weakness primarily located outside the euro area in recent months (+1.3% YoY). In contrast, new order intake from within the Eurozone is holding up well, up +4.7% YoY. It remains to be seen, however, whether strengthening Eurozone demand will remain able to compensate for weakness elsewhere in the world economy in the months ahead.”