Eurozone Industrial Production Drops in May

Euro zone industrial production dropped sharply in May with only the energy sector thriving, another sign that the bloc’s economic recovery remains fragile.

Output in the 18 countries sharing the euro dropped 1.1 percent on the month in May, following a 0.7 percent rise in April, data on Monday from the European Union’s statistics office Eurostat showed. That was still less than the 1.2 percent monthly fall forecast in a Reuters poll ECONEZ.

Compared with the same period in 2013, factory gate output grew by 0.5 percent, in line with market expectations, after a 1.4 percent rise in April

“May’s sharp drop in industrial production highlights the lackluster and bumpy nature of the euro zone recovery,” said Martin van Vliet, euro zone economist at ING Bank.

The month-on-month decline was led by a 2.4 percent fall in production of intermediate goods – such as parts used for cars. There was a 2.2 percent drop in the production of non-durable items such as food or cosmetics.

The energy sector was the only one to grow, showing a 3 percent increase after 1.2 percent growth in April.

Analysts said the sharp decline in May production could have been exacerbated by the timing of public holidays, adding that recent weakness in output is more pronounced than suggested by other indicators of economic health.

“We would need to see further PMI weakness before we become concerned about a stalling industrial (and wider) recovery,” said van Vliet, referring to the monthly Purchasing Managers’ Index surveys of private sector activity.

Industrial production in the euro zone’s three biggest economies – Germany, France and Italy – fell month-on-month. Germany’s 1.4 percent decline was the biggest since May 2013.

A 1.3 percent fall in French industrial production was the steepest since June 2013 and Italy’s production registered its worst performance since November 2012 with a 1.2 percent drop.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza