Analysis: Eurozone Industry Weaker Than Expected In October

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Oct preliminary: -1.4% m/m, -3.6% y/y

MNI survey median: -0.2% m/m, -2.5% y/y
MNI survey range: -1.5% to +1.1% m/m

September revised: -2.3% m/m (-2.5%)
August unrevised: +0.9% m/m
July unrevised: +0.5% m/m
June unrevised: -0.4% m/m
May unrevised: +0.9% m/m

PARIS (MNI) – Eurozone industry output fell more than expected in
October to a 30-month low, with declines in most of the larger
economies, Eurostat said Wednesday.

The 1.4% monthly decline left production more than 12% below
pre-crisis levels and 2.7% below the 3Q average, which had recovered by
0.4% after two quarters of decline. Over a third of analysts surveyed by
MNI had expected a recovery after the plunge in September.

Apart from consumer non-durables (+1.2%), all categories posted
declines in October: intermediate goods (-1.2%), capital goods (-3.0%),
consumer durables (-3.8%), and energy (-1.5%). Annual comparisons showed
energy holding up best (+0.4%) and consumer durables hit hardest

Some leading indicators suggest that Eurozone industry may be
finally bottoming out.

The Eurozone factory PMI regained 0.8 point in November to 46.2 on
the back of modest gains in most components. German manufacturers polled
by Ifo were marginally more satisfied with current business and less
pessimistic about the medium term, notably for exports. French industry
morale recovered from a 39-month low in October, according to Insee.

A broader survey by European Commission showed manufacturing
sentiment rebounding to a four-month high in November, largely
reflecting a less negative assessment of recent output and near-term

Yet with domestic demand depressed by fiscal tightening and
widespread uncertainty, and external demand losing momentum, a
substantial recovery in Eurozone industry still appears a long way away.

German industry output dropped 2.6% in October, led by further
steep slides in capital goods and consumer durables, and it was 3.8%
lower on the year. Producers polled by the Ifo institute in November
reported only a marginal recovery in business conditions but were
somewhat less pessimistic about medium-term prospects in light of
improving export prospects.

French industry also surprised to the downside in October with a
further 0.6% slide after September’s 2.8% plunge, dragged down by the
slump in the auto industry and related sectors. The steady drain on
order books, the loss of market shares and the compression of margins to
near historic lows have deprived firms of the financial resources for
investment and innovation to keep up with competitors.

Production in Italy fell another 1.1% in October after a 1.3%
downturn to stand 6.2% lower on the year. Sector sentiment has
stabilized since spring around the lows last seen three years ago, but
producers’ outlook for orders and production recovered slightly in
November, according to Istat’s surveys. The November factory PMI, by
contrast, was weaker across the board.

In Spain, by contrast, output recovered by 1.2% after a 3.0% drop
and was 3.3% lower on the year. Reviving export growth has so far been
unable to offset the slump in domestic demand throttled by fiscal
consolidation and high unemployment. According to the Commission’s
surveys, sector sentiment recovered in November to a six-month high,
reflecting a less negative assessment of recent production and near-term

Among the smaller reporting countries monthly results were quite
mixed, with marked declines in the Netherlands (-4.7%), Slovakia (-3.9%)
and Estonia (-5.3%) and partial recoveries in Ireland (+2.7%), Portugal
(+4.8%) and even Greece (+0.7%).

Compared to previous-year levels, output was higher in October in
Slovakia (+8.1%), Slovenia (+2.1%), Malta (+4.5%), Greece (+1.8%) and
Estonia (+0.1%). Annual declines were reported in Ireland (-16.2%),
Finland (-0.6%), Luxembourg (-3.5%) and the Netherlands and Portugal
(both -3.9%).

–Paris newsroom +331 4271 5540; e-mail:



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