Industrial production in Germany and Italy began the final quarter of the year with a stumble after France and Spain reported similar outcomes, pointing to a possible recession in the region.
Output in Europe’s biggest economy fell 0.4 per cent in October from the previous month to the lowest level since August 2020, the German statistics office said Thursday. In Italy, production declined 0.2 per cent from September.
While the scope of each statistics sample isn’t totally comparable, the coincidence of a downswing in both economies along with negative results in France and Spain on Tuesday highlight how weakness is emerging in hard data from around the region.
Euro-zone gross domestic product shrank by 0.1 per cent in the third quarter – a reading that was confirmed on Thursday and attributed to changes in inventories. The previous period’s 0.2 per cent advance, though, was revised down to 0.1 per cent.
While the data showed household consumption remained strong in the three months through September, another quarter of contraction would mean a recession. Recent surveys signal that the euro-area downturn in services and manufacturing is persisting.
For Germany, the drop in production was unexpected; the median economist prediction was for a 0.2 per cent increase. The outcome shows how the economy is still struggling to shake off the impact of an energy-induced crisis last winter and a drop in global demand.
Manufacturers – Germany’s economic backbone – are particularly affected by expensive energy, higher interest rates and weak global demand. Several big industrial firms have started cutting costs, and chemical maker BASF SE plans to reduce investment by almost 15 per cent over the next four years.
Data earlier this week showed that factory orders declined more than expected, further dimming the outlook for a recovery. The budget turmoil in Berlin is also weighing on Germany’s outlook.
Still, recent surveys there suggest some stabilisation. The IFO institute’s business outlook last month reached a six-month high. A poll of purchasing managers, meanwhile, highlighted “considerable weakness,” though easing conditions support a return to growth.
Other countries are faring only slightly better. The 0.3 per cent drop in French production during the month was due to lower output of energy and equipment goods. But manufacturing, which excludes energy, eked out a 0.1 per cent gain.
On Thursday, Bank of France Deputy Governor Agnes Benassy-Quere insisted that, while growth in the country is weak, the institution isn’t anticipating a recession.
“The central scenario is that it’s really a soft landing of the global and European economies,” she said.
The 0.2 per cent drop in Italian industrial production was better than the 0.4 per cent declined anticipated by economists. – Bloomberg
