Eurozone Industrial Production Fell Unexpectedly in May
Eurozone industrial output fell unexpectedly in May, snapping a three-month streak of resilient activity in the face of higher energy costs following the US imposed war on Iran.
Industrial production fell 0.2% from the previous month, compared with an upwardly revised 0.3% rise in April, the European Union’s statistics agency, Eurostat, said Wednesday. Economists polled by The Wall Street Journal had expected a 0.2% increase.Industrial data follows surveys pointing to a gradual loss of momentum in Europe’s factories from May. The S&P Global eurozone manufacturing purchasing managers index fell to a two-month low in the month, with input costs rising at their fastest pace since May 2022. The PMI for June slipped even further.“Industrial production in the eurozone continues to trudge along at a sluggish pace without clear direction,” said Bert Colijn, senior economist at ING.Still, the decline is a modest one and leaves output above its February level, when the conflict in Iran began, he added.The decline in May was driven by a fall in durable consumer goods production, with an increase in German and Spanish output offset by declines in France and Italy, as well as a steep fall in Ireland.Excluding the Irish figure, industrial production rose 0.3%, according to Iain Simmons, an economist at Oxford Economics. He added that the sector is still expected to provide a modest boost to economic growth in the second quarter.
Until May, manufacturing activity had continued to outperform expectations since the outbreak of the war. Despite higher oil and gas costs, some producers benefited from customers bringing forward orders to get ahead of potentially higher prices and supply shortages, while greater disruption to Asian competitors supported demand for European manufacturers.“This keeps manufacturing production decent for the moment and also results in some muted optimism about the outlook despite continued uncertainty around the Middle East conflict,” ING’s Colijn said.Eurozone gross domestic product contracted in the first three months of the year, with geopolitical uncertainty raising concerns that the economy could slip into a recession in the second quarter. Still, resilience across the economy over the quarter as a whole has helped ease those fears. Services output, which accounts for the bulk of eurozone economic activity, rose by 0.7% in April.For the European Central Bank, a resilient economy could provide more room to combat inflation, with higher interest rates less likely to raise growth concerns. The ECB raised rates last month, warning that the conflict in Iran could drive up costs and create broader price pressures across the economy.
Looking ahead, a breakthrough in talks between Iran and the US provided some relief for Europe’s energy-intensive industries in June, though renewed tensions in recent days risk prolonging uncertainty over energy costs and supply conditions.“Hopes for more geopolitical stability, lower energy prices and strong public investment seem to drive optimistic views for now. The latter seems more of a sure bet than the first two, with Middle East uncertainty back on the table,” Colijn said.
14:32 - 24 تیر 1405
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