Thursday

25th Aug 2016

European industrial output slumps

  • Europe's manufacturing output fell for the second successive month (Photo: arbyreed)

The eurozone economy is facing another slowdown after figures revealed that industrial output fell for a second successive month.

Data published on Wednesday (13 August) by Eurostat showed a 0.3 percent drop in output, which covers manufacturing and energy goods, in June across the 18-country currency bloc and by 0.1 percent across the EU’s 28 member states.

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Strong performances in Malta and Denmark, together with slight increases in Germany, France and Italy, were offset by substantial falls in Ireland, the Netherlands, and Spain.

Industrial production across the bloc is now at its lowest level in nine months.

EU officials had hoped that 2014 would be the start of a slow but steady recovery by the eurozone, with the European Commission forecasting in May that the 18-country bloc would grow by 1.2 percent this year followed by a 1.7 percent spike in 2015.

But new data is making these projections look increasingly optimistic.

Instead, it is expected that data to be published Thursday by Eurostat will reveal a slowdown in the eurozone economy in the second quarter of 2014 after having only recorded a meagre 0.2 percent growth rate between January and March.

With the bloc still seeing stubbornly high unemployment levels and price increases of 0.4 percent, well below the European Central Bank’s 2 percent target, officials in Brussels and Frankfurt were already alert to the risk of stagnation.

Meanwhile, the EU’s ongoing sanctions battle with Russia, which has now seen Brussels and Moscow slap bans on food imports from each other, has emerged as a new threat to growth prospects.

On Tuesday, research by German thinktank ZEW found that the country’s investor sentiment has dropped to its weakest level since 2012 based, in part, on concerns that the sanctions will hurt its export-based economy.

For its part, the European Central Bank (ECB) has cut its main interest rate to a record low of 0.15 percent and is preparing to follow the lead of the US Federal Reserve by launching its own government bond buying programme – known as quantitative easing (QE) – in a bid to cut the cost of borrowing for businesses.

However, ECB president Mario Draghi has said the ECB will only launch a QE programme if the eurozone economy goes back into recession.

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