December: -0.1% m/m, +8.0% y/y

MNI survey median: flat m/m, +8.0% y/y
MNI survey range: -1.3% to +0.5% m/m

November: +1.4% m/m (revised from +1.2%)
October: +0.8% m/m (revised from +0.7%)
September: -0.7% m/m (unrevised)
August: +1.2% m/m (unrevised)
July: +0.2% m/m (unrevised)
—

FRANKFURT (MNI) – Industrial production in the Eurozone lost modest
ground in December, with weakness in consumer and intermediate goods
output offsetting further gains in capital goods and energy production,
Eurostat reported on Monday.

On the month, production slipped 0.1%, though base effects resulted
in a wider annual gain of +8.0%. Median forecasts had been for
essentially no change in output levels last month, though analysts were
divided on the direction.

On the quarter, industry expanded 1.7% compared to 3Q, which in
turn was 1.0% higher than the previous period, suggesting a stronger
contribution to overall activity. Preliminary estimates for 4Q GDP
growth are scheduled for release on Tuesday.

Over 2010 as a whole, production rose 7.1% on average.

Intermediate goods production fell 1.3% between November and
December, narrowing the annual gain to 7.8%. Durable consumer goods
production slipped 1.0% on the month, though the annual change came to
+2.1%, while consumer non-durables fell back 0.3%, resulting in a +1.9%
annual figure.

Conversely, capital goods output gained an additional 0.7% on the
month, widening the annual rise to 14.8%, while energy goods were up
2.4% and 5.8% on the month and year, respectively.

Sharp falls in Germany’s intermediate goods and construction output
left overall industrial production flat on the month, but resulted in
stronger annual gain of 11.8%. Thanks to previous robust gains, 4Q
output was still up 2.4% on the quarter.

While German industry orders declined in December, the robust rise
in November assured a 2.7% gain in 4Q after +1.8% in 3Q, pointing to a
rebound in production in the near term. Indeed, the January factory PMI
showed output expanding at the fastest pace in six months and very
dynamic growth in new orders. The Ifo institute’s January survey showed
manufacturers’ six-month outlook at the highest level in years,
bolstered by high expectations for exports.

The 0.3% monthly rise in French industrial production boosted the
overall output index to its highest level since the onset of the
financial crisis and widened the annual change to +7.7%.

As in Germany, leading indicators suggest that French production
growth remained strong in January, including the most recent Bank of
France industry survey, which pointed to a marked rise in activity and
order book levels above normal. Insee’s sector survey signaled a sharp
rise in recent output and new orders, boosting firms’ near-term
production outlook to a three-month high. By contrast, the factory PMI
indicated that the upward momentum in both output and new orders
continued to slow at the start of the year.

Industrial production in Italy also increased by 0.3% on the month,
resulting in an annual figure of +5.4%.

The Italian manufacturing PMI showed strong growth in both orders
and output last month, while firms polled in the latest ISAE business
survey revised up their assessment of the both the production and
economic outlook.

In Spain, production dipped 0.8% between November and December,
cutting the annual change to -0.1%.

However, Spanish new orders, which rebounded in November to their
highest level since October 2008, could hint at an improvement in output
in the near term. Still, it appears that sentiment in the manufacturing
sector will require more than a one-time turnaround in orders before
brightening.

The latest European Commission survey showed that production
expectations in Spain eroded last month, with order books falling
further below the long-run average.

Outside of the larger Eurozone economies, the strongest monthly
jumps were noted in Slovenia (+4.2%), followed by Portugal (+3.8%) and
Estonia (+1.3%). On the other side of the spectrum, Ireland (-1.7%) led
the way in declines, followed by Malta (-1.2%).

Insee and Ifo project Eurozone industrial growth to ease to +0.3%
in the current quarter due to weakening demand out of Japan, emerging
Asia and Latin America.

“Moreover, the expected tightening of fiscal policy in most member
states should weigh on purchasing power and domestic demand in the euro
area,” the institutes said last month.

— Frankfurt bureau: +49 69 720 142; e-mail: frankfurt@marketnews.com —

[TOPICS: M$X$$$,M$XDS$,MT$$$$]