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Eurozone industrial production falls Eurozone industrial production falls
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Industrial production in the eurozone slumped in August by 0.5%, according to official figures that illustrate the impact of falling demand for Europe’s cars and machine tools in China and the east Asia.Industrial production in the eurozone slumped in August by 0.5%, according to official figures that illustrate the impact of falling demand for Europe’s cars and machine tools in China and the east Asia.
The latest figures showed an even bigger drop in the year-on-year growth rate to just 0.9% growth when a rise of 1.8% had been expected.The latest figures showed an even bigger drop in the year-on-year growth rate to just 0.9% growth when a rise of 1.8% had been expected.
The weak figures are expected to put pressure on the European Central Bank to expand its stimulus programme when it meets next week in Malta. ECB boss Mario Draghi has hinted that €60bn (£44bn) a month of bond purchases under its quantitative easing plan until September 2016 could be increased in size or extended at the meeting on 22 October.The weak figures are expected to put pressure on the European Central Bank to expand its stimulus programme when it meets next week in Malta. ECB boss Mario Draghi has hinted that €60bn (£44bn) a month of bond purchases under its quantitative easing plan until September 2016 could be increased in size or extended at the meeting on 22 October.
A 1.1% fall in Germany was more than offset by a 1.6% rise in France, but the weight of declines among Europe’s smaller countries dragged down the total for the currency bloc’s 19 members. A 4.3% decline in the Czech Republic’s industrial output spearheaded a long list of fallers that included the Netherlands, down 1.5%, Denmark (-1.1%) and Spain (-1.3%).A 1.1% fall in Germany was more than offset by a 1.6% rise in France, but the weight of declines among Europe’s smaller countries dragged down the total for the currency bloc’s 19 members. A 4.3% decline in the Czech Republic’s industrial output spearheaded a long list of fallers that included the Netherlands, down 1.5%, Denmark (-1.1%) and Spain (-1.3%).
The situation in Germany is unlikely to improve in the next few months according to analysts, who said recent surveys and the Volkswagen scandal would only add to Berlin’s recent woes. The situation in Germany is unlikely to improve in the next few months, according to analysts who say recent surveys and the Volkswagen scandal will only add to Berlin’s recent woes.
The ZEW surveys of economic expectations among business leaders plunged from 12.1 to 1.9 points, significantly missing market consensus of a more moderate decline to 6.5 points. In response to the deteriorating situation the German government has trimmed its growth forecast for this year.The ZEW surveys of economic expectations among business leaders plunged from 12.1 to 1.9 points, significantly missing market consensus of a more moderate decline to 6.5 points. In response to the deteriorating situation the German government has trimmed its growth forecast for this year.
The economy minister, Sigmar Gabriel, said Wednesday that Berlin now expects growth of 1.7% in Europe’s biggest economy, down slightly from the 1.8% the government predicted in April. He left the forecast for 2016 unchanged at 1.8%. The economy minister, Sigmar Gabriel, said on Wednesday that Berlin now expects growth of 1.7% in Europe’s biggest economy, down slightly from the 1.8% it predicted in April. He left the forecast for 2016 unchanged at 1.8%.
Stefan Schilbe, an economist at HSBC Trinkaus and Burkhardt, said the deterioration in emerging market growth was the main factor weighing on sentiment. “The collapse in the German index therefore likely reflects the impact of the VW emissions scandal,” he said.Stefan Schilbe, an economist at HSBC Trinkaus and Burkhardt, said the deterioration in emerging market growth was the main factor weighing on sentiment. “The collapse in the German index therefore likely reflects the impact of the VW emissions scandal,” he said.
The eurozone industrial production figures were compiled before the car firm confessed to rigging its vehicles to circumvent emissions tests, leading to fears that subsequent months will see further falls in manufacturing outputThe eurozone industrial production figures were compiled before the car firm confessed to rigging its vehicles to circumvent emissions tests, leading to fears that subsequent months will see further falls in manufacturing output
Bert Colijn, an economist at ING Financial Markets, said the ECB will be disappointed that an improved situation for manufacturers, with cheap oil and a lower euro, has failed to improve industrial production. “A cheap euro, improving domestic demand, decreasing inventories, an increasing trend in new orders and upbeat producers have all failed to result in growth in industrial production in 2015,” he said.Bert Colijn, an economist at ING Financial Markets, said the ECB will be disappointed that an improved situation for manufacturers, with cheap oil and a lower euro, has failed to improve industrial production. “A cheap euro, improving domestic demand, decreasing inventories, an increasing trend in new orders and upbeat producers have all failed to result in growth in industrial production in 2015,” he said.
But he argued the outlook was broadly favourable. He said new orders for manufacturing increased at the fastest pace since 2011 on a 6-month basis in July. And business surveys indicate that output is expanding modestly in the manufacturing sector. “Even though concerns about China and Volkswagen are on top of mind, the conditions for modestly improving production seem to be there,” he said. But he added that the outlook was broadly favourable, with new orders for manufacturing increasing at the fastest pace since 2011 on a 6-month basis in July. And business surveys indicate that output is expanding modestly in the manufacturing sector. “Even though concerns about China and Volkswagen are on top of mind, the conditions for modestly improving production seem to be there,” Colijn said.
Dennis de Jong, managing director at currency dealer UFX.com was more pessimistic, and said Draghi may feel compelled to expand QE. “With China’s economy giving off renewed signals of distress and the Volkswagen scandal hitting business hard in Germany, today’s announcement of disappointing industrial production data will come as no surprise,” he said. Dennis De Jong, managing director at currency dealer UFX.com was more pessimistic, and said Draghi may feel compelled to expand QE. “With China’s economy giving off renewed signals of distress and the Volkswagen scandal hitting business hard in Germany, today’s announcement of disappointing industrial production data will come as no surprise,” he said.
“These figures may only be the tip of the iceberg. It’s going to be a very tough fourth quarter for ECB president Mario Draghi who, while remaining resolute that his QE programme is doing the trick within, will know that the health of the eurozone also relies on factors that are out of his control.“These figures may only be the tip of the iceberg. It’s going to be a very tough fourth quarter for ECB president Mario Draghi who, while remaining resolute that his QE programme is doing the trick within, will know that the health of the eurozone also relies on factors that are out of his control.
“Draghi can still hold hope of a silver lining to the week, with Friday’s monthly inflation figures set to tick upwards.”“Draghi can still hold hope of a silver lining to the week, with Friday’s monthly inflation figures set to tick upwards.”