Euro area’s industrial production falls markedly in December, likely to increase in January

Euro area’s industrial output dropped markedly. Sequentially, industrial production fell 0.9 percent in December after falling 1.7 percent in the prior month. The softness was driven by production of capital goods and consumer non-durables, both down for the second straight month and by 1.5 percent.  Among member states, notable monthly falls were seen in Italy, Spain and Netherlands and, most extremely Ireland.

On a year-on-year basis, industrial production in the euro area dropped 4.2 percent, the biggest fall since the immediate aftermath of the global financial crisis in 2009, with falls of 4 percent year-on-year or more in the production of consumer durables, capital and intermediate goods and substantive fall in each of the five largest member states.

In the whole of fourth quarter, industrial production dropped 1.4 percent, the biggest quarterly fall since the post-euro crisis recession in 2012.

“We expect euro area production to post an increase in January not least due to increased output in Germany, Spain, the Netherlands and Ireland. However, with the manufacturing new orders PMI down in January to a near six-year low of just 47.8, there appears to be a non-negligible risk of a further decline in production over the first quarter as a whole”, said Daiwa Capital Markets Research in a report.

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