Eurozone industrial production falls by 0.5 per cent

Output in the Eurozone industrial sector declined by 0.5 per cent in September - more than the expected 0.3 per cent. This follows a rise of one per cent in August.

Compared to September 2012, industrial production increased by 1.1 per cent in the euro area and by 1.2 per cent in the 28 EU countries.

Production in durable consumer goods fell in September by 2.6 per cent in the euro area and 1.6 per cent in the EU 28, compared to the previous month. Intermediate goods declined by 0.8 per cent in the euro area and by 0.5 per cent in the EU 28, with non-durable consumer goods dropping by 0.2 per cent in the euro area but rising by 0.4 per cent in the EU 28.

Among the member states for which data is available, eurostat report that industrial production fell in twelve and rose in thirteen. The sharpest declines were seen in Portugal (-11.2 per cent), Luxembourg (-4.1 per cent) and Croatia (-3.3 per cent). The largest increases were registered in Ireland (+2.9 per cent), Romania (+2.4 per cent) and Hungary (+1.8 per cent).

James Howat, European economist at Capital Economics, says:

September’s fall in euro-zone industrial production indicates that the sector will have dragged on GDP growth in Q3. Production edged down by 0.5% in September, a touch weaker than the consensus forecast of -0.3%. September’s drop was broad-based, with every component falling apart from energy. Industrial production in the periphery was fairly encouraging, rising by 0.2% and 0.4% in Italy and Spain respectively in September. But production in the core economies slumped. German and French production fell by 0.8% and 0.4% respectively.

Howard Archer, chief European and UK economist at IHS Global Insight:

We expect persistent very low Eurozone consumer price inflation, ongoing difficulties in building growth momentum and limited improvement in Eurozone credit conditions will prompt further action from the ECB. The ECB could also be prompted to act if there are significant moves up in market interest rates when the US Federal Reserve finally starts to taper.

Our current view is that the ECB is likely to keep its refinancing rate at 0.25% through to 2015 and will most likely do another Long-Term Refinancing Operation (LTRO) within the next few months. We remain skeptical that the ECB will go down the negative deposit rate route and we suspect Quantitative Easing will prove to be too controversial a policy within the Governing Council to get adopted.