AN UNEXPECTED sharp contraction of the Eurozone’s industries in July, announced yesterday casts a cloud over the currency union’s fragile exit from recession.
Industrial production dipped by 1.5 per cent between June and July, meaning that production is down 2.1 per cent compared to a year ago.
Production is now back below its 2010 level, and way below its peak before the financial crisis.
The euro area saw meagre growth in the second quarter, breaking an 18-month recession, but many analysts yesterday were sceptical that this growth will continue.
Markit’s Chris Williamson commented: “There is clearly a risk that GDP could contract again in the third quarter, as some of this second quarter growth proves to have been only temporary or perhaps even illusory.”
Ben May, European economist for Capital Economics, added: “July’s industrial numbers provided something of a reality check following the recent raft of positive news on the Eurozone economy. Indeed, since the second quarter, the economy may even have lost some steam.”
Announcements on August consumer price inflation were also made in Spain, France and Italy yesterday, coming in at 1.5, one and 1.2 per cent respectively. All were below the European Central Bank’s target for price rises at just below two per cent.