Euro area - Very weak IP numbers in August The Euro area posted very weak industrial production (IP) numbers in August according to Eurostat. IP was down a hefty 1.8% on a m-o-m basis after a 1.6% increase in July. Bad figures were expected given the impact of sanctions on trade with Russia. The m-o-m numbers are also variable showing as many increases as decreases in the first eight months of the year. However, perhaps a better guide to the true state of affairs is that IP fell in August 1.9% on a y-o-y basis. IP had been positive y-o-y for the last twelve months. Leading indicators for the Euro area such as the PMI and ESI were also weak for August and indeed for September suggesting that the Euro area may be flirting with another recession as well as possible deflation in coming months. The emphasis, then, is on the ECB to take further action to loosen monetary policy even as its unorthodox measures (negative discount rate, TLTRO, purchases of ABS/covered bonds) are still being deployed. While they are unlikely to be sufficient to turn the economy around they have at least brought the Euro down significantly against the US$. Five of the eleven countries in Eastern Europe that reported IP figures showed negative readings in August on a y-o-y basis. The strongest reading was a modest 4.6% y-o-y expansion in Slovenia.
Posted on: Wed, 15 Oct 2014 13:15:07 +0000