Euro area industrial production output falls again in July, sector likely to weigh on GDP growth

The change in manufacturing sector’s fortunes have been an important factor behind the acceleration in euro area GDP in 2017 and subsequent easing in growth in 2018. At the turn of 2018, manufacturing output was trending higher at an annual pace of over 5 percent year-on-year for the first time since 2011.

However, since then, as growth in new orders and external demand has eased, momentum in the sector has softened steadily. Industrial production in the currency bloc fell for the second straight month by 0.7 percent sequentially in July, whereas it fell to 0.2 percent year-on-year, the weakest in over two years.

Member-state wise, Germany and Italy recorded particularly steep falls in manufacturing output, with the latter falling below its level one year earlier for the first time since January 2017.

Beyond manufacturing, energy output rose 0.7 percent sequentially. However, that was not enough to avert total industrial production output falling 0.8 percent sequentially and to 0.8 percent below the average level in second quarter.

Thus a noticeable recovery over the remainder of the quarter would be needed to avert a third straight quarterly fall, noted Daiwa Capital Market Research in a report.

“With the euro area manufacturing output PMI still close to the bottom of the range of the past two years in August, and survey measures of new orders and new export orders down to the lowest levels in a year or more, the sector looks set to be a drag on overall GDP growth for a while to come”, added Daiwa Capital Market Research. 

At 17:00 GMT the FxWirePro's Hourly Strength Index of Euro was neutral at 29.9995, while the FxWirePro's Hourly Strength Index of US Dollar was highly bearish at -103.038. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex