September: -0.9% m/m, +5.2% y/y

MNI survey median: +0.3% m/m, +7.1% y/y
MNI survey range: -0.5% to +0.8% m/m

August: +1.1% m/m (revised from +1.0%)
July: +0.1% m/m (unrevised)
June: -0.2% m/m (revised from -0.1%)
May: +1.1% m/m (revised from +1.2%)
April: +0.6% m/m (revised from +0.7%)
—

FRANKFURT (MNI) – Industrial production lost ground in September
after two consecutive months of growth, with all major components
suffering setbacks, Eurostat reported on Friday.

Taking into account revisions to previous months, September’s 0.9%
downturn resulted in the annual gain narrowing to a 5.2%, its weakest
rate since February.

Before the release of disappointing results from Germany and
France, most analysts had expected monthly growth of at lease 0.3%.

Making up over one third of the total production index,
intermediate goods output fell 1.3% on the month (+6.8% y/y), matching
the decline in capital goods output (+7.5% y/y).

Durable consumer goods production plummeted 3.0% in the month since
August (-0.2% y/y), while consumer non-durables continued to lose
ground, falling 0.6% (+1.6% y/y). Energy production also contracted,
slipping 0.9% m/m (+1.8% y/y), deepening August’s decline.

Manufacturers polled in Markit Economics’ latest purchasing
managers index reported a recovery in output in October. The PMI report
also highlighted new orders rising for the 15th consecutive month,
suggesting production should maintain its upward trend in the near term.

The latest European Commission survey supported this view,
highlighting the ongoing climb in production expectations and order book
assessment.

However, the slowdown in the global recovery, combined with an
appreciating euro, pose downside risks to production in the months
ahead.

A broad-based decline in Italian industry left overall output down
2.1% on the month in September, its first setback in nearly a year and
the sharpest fall among the larger Eurozone states, cutting the annual
rise to 4.1%.

However, cautious interpretation of the data is warranted. A part
of the contraction was due to the government ending tax breaks for firms
updating their capital, while the factory shutdown over the summer
months could lead to statistical distortions.

ISAE’s sector survey signaled stronger new orders in October and
expectations of further gains, which brightened firms’ near-term
production prospects slightly. ISAE expects output to recover 0.5% in
October and 1.6% in November. With a 0.3% dip in December, industry
would post a 0.3% gain in 4Q.

Spanish industrial output also saw a significant contraction,
falling 1.5% between August and September, resulting in an annual drop
of 1.4%.

The Commission’s survey showed industrial sentiment recovering to
its long-term average in October, with orders gaining strength. However,
while stocks were below average, firms remained somewhat pessimistic
about near-term production prospects.

Industrial output in the Eurozone’s largest economy contracted for
the first time in two months, slipping 0.8% between August and September
and narrowing the annual gain to 8.3%. The decline was broad-based, with
only capital goods production unchanged on the month. But construction
activity rose to its highest level since April.

While production lost ground in September, German manufacturers’
assessment of the present situation and the six-month outlook improved
in October, lifting the Ifo institute’s business climate indicator to
its highest point since mid-2007. Still, the 4% decline in new orders in
September after +3.5% in August points to less fuel for the motor and
suggests that the pace of growth could lose a little steam.

In France, output was unchanged on the month after slowing
drastically in August to give an annual rise of 4.2%.

A number of recent indicators, including the Bank of France’s
survey and the PMI polls point to ongoing strength in new orders,
suggesting that output will maintain an upward trend in the near term.
Strikes in the energy and transport sectors, however, may leave a dent
in activity in October.

In smaller Eurozone states, the sharpest monthly fall was noted in
Malta (-5.6%), followed by Greece (-5.4%) and Portugal (-4.7%).
Conversely, Ireland led the way in gains (+7.9%). The only other
Eurozone state to show positive monthly growth was Finland (+0.8%).

— Frankfurt bureau: +49 69 720 142; email: frankfurt@marketnews.com —

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