July preliminary: +1.0% m/m, +4.2% y/y

MNI survey median: +1.4% m/m, +4.4% y/y
MNI survey range: -0.5% to +2.5% m/m

June: -0.8% m/m (revised from -0.7%)
May: +0.2% m/m (unrevised)
April: +0.2% m/m (unrevised)
March: -0.1% m/m (unrevised)
February: +0.5% m/m (unrevised)
—

PARIS (MNI) – Eurozone industry output bounced back less than
generally expected in July, as strong gains in the core economies were
offset by declines in much of the periphery, Eurostat said Wednesday.

The 1.0% monthly upturn left output 0.5% above the 2Q average — a
promising start for 3Q — but still nearly 10% below pre-crisis peaks.

Leading indicators suggest the recovery will be short-lived in the
face of fiscal tightening at home and monetary tightening in many
emerging economies.

Industry growth slowed to only 0.3% in 2Q, and sector morale has
eroded further in the meantime, falling to a 13-month low in August,
according the European Commission. Near-term output prospects plunged 10
points to below-average levels as new orders waned further and finished
goods stocks continued to pile up. Producers expect a marked decline in
export volumes in 3Q.

The August factory PMI showed output contracting (48.9) for the
first time in two years, while finished goods stocks rose for the first
time since December 2008. The accelerating slide in new orders (46.0),
with domestic demand leading the way down, suggests that the slump could
steepen into 4Q.

Most manufacturing branches posted a recovery in July, led by
capital goods (+3.0%) and consumer durables (+2.9%). Intermediate goods
lagged (+0.8%), while consumer non-durables contracted (-0.6%) for the
third month in a row. Energy output fell (-0.8%) after two months of
gains.

Capital goods output has risen most over the past 12 months
(+11.7%), outdistancing intermediate goods (+4.1%) and consumer durables
(+3.0%). Non-durables output was lower on the year (-0.9%), as was
energy production (-5.3%).

The upturn in July was led by Germany’s 4.1% rebound from a 0.8%
dip in June. National data showed a particularly strong rise for
investment goods and consumer durables. Ifo’s survey last month suggests
that manufacturers are now tempering their euphoria over current
conditions and growing more and more worried about prospects for the
medium term.

In France, output recovered by 1.6% in July, enough to retrace the
drop in June, thanks to the comeback in the high-tech, electronics and
heavy transport branches, national data showed. The Bank of France
estimated last week that output expanded “very slightly” in August, but
not enough to reverse the decline in capacity utilization. PMI polls
show a marked contraction in August for both output (46.9) and new
orders (47.0).

In Italy, by contrast, output fell for the third straight month by
0.7% in July to a six-month low. Industry orders dropped 1.7% in May due
to a plunge in domestic demand. The PMI polls show the slide in orders
accelerating into August (44.0). Sector morale recovered somewhat from
July’s 12-month low, according to Istat, but near-term output
expectations fell further to the weakest level since the start of last
year.

In Spain, output was also down 0.7% on the month and 2.8% lower on
the year. Sector sentiment has deteriorated sharply from average levels
in June, reflecting the ongoing erosion of orders, according to the
Commission’s survey. The PMI polls suggest the decline in output
steepened in August (44.5) to the fastest pace in over two years.

Elsewhere, monthly output gains were robust in the Netherlands
(+3.5%), Luxembourg (+3.1%), Estonia (+4.7%) and even in Greece (+4.1%),
while Ireland posted a partial recovery (+0.8%). Other reporting
peripheral countries sustained declines: Finland (-0.3%), Malta (-1.2%),
Slovenia (-2.2%) and Slovakia (-3.4%)

Annual comparisons highlight the industrial contraction in the
bailout countries Greece (-2.9%), Portugal (-4.4%) and Ireland (-4.9%),
as well as in Malta (-3.2%). Elsewhere, the annual gains ranged from
modest in Finland (+1.7%) and Slovenia (+1.9%) and moderate in
Luxembourg (+2.9%) to dynamic in the Netherlands (+4.0%), Slovakia
(+5.0%) and especially Estonia (+22.9%).

–Paris newsroom +331 4271 5540; e-mail: stephen@marketnews.com

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