Dec preliminary: -1.1% m/m, -2.0% y/y

MNI survey median: -1.2% m/m, -1.1% y/y
MNI survey range: -2.5% to -0.6% m/m

November revision: flat m/m (-0.1%)
October: -0.3% m/m
September: -2.1% m/m
August revision: +1.1% m/m (+1.2%)
July: +0.8% m/m
—

PARIS (MNI) – Eurozone industry output contracted much as expected
in December, with declines in all branches except consumer goods,
Eurostat said Tuesday.

Taking account of the upward revision for November, the 1.1%
monthly downturn left output 2.0% lower on the year and more than 10%
below pre-crisis peaks. Production in 4Q was down 1.8% after a 0.4% gain
in 3Q, highlighting downside risks for 4Q GDP.

Amid balmy temperatures in early winter, energy output fell another
2.0% in December after three months of decline and was 11.9% lower on
the year.

Capital goods output was down 0.8% on the month but still 0.8%
higher on the year — the sole annual rise across branches. Intermediate
goods output was down 0.7% on the month and 0.5% lower on the year.
Consumer durables edged up 0.2% after four months of decline for a 3.9%
annual contraction. Non-durables were flat on the month and 0.8% lower
on the year.

The erosion in most leading indicators for Eurozone industry came
to a halt at the end of last year, but weak order levels still point to
declining production ahead. October-November orders were 4.0% below the
3Q average, which itself was down 2.8% from 2Q.

The January factory PMI polls flagged a modest recovery in output
(50.4) but a further decline in new orders (46.5), though at a slower
pace than in December.

The European Commission’s barometer for industry sentiment has
stabilized in recent months at below-average levels. Producers’
assessment of recent output recovered somewhat in January but their
outlook for the near term eroded marginally after a rebound in December.

While demand may be bottoming out, back orders are still being
depleted. Fiscal tightening within the Eurozone, tougher borrowing
conditions and the retrenchment in public investment will continue to
weigh on domestic demand at a time when global activity is losing steam.

The latest joint projections by the national statistics office of
France and Italy and the leading private institute in Germany foresee
Eurozone industry production falling through mid-year, with a steeper
drop of 2.1% in 1Q and a decline of 0.5% in 2Q.

German industry output had surprised on the downside in December
with a 2.7% plunge that gave an annual decline 0.7%. National data
showed falls in all key sectors led by capital goods. Manufacturing
orders recovered 1.7% in December, retracing a third of November’s dive.

German producers polled by Ifo in January said current conditions
had improved slightly after six months of erosion and prospects at the
six-month horizon recovered further after a steep slide in the first
half of last year.

In France, output fell back 1.3% in December, retracing the
recovery of the previous two months on declines in most sectors except
for refining. Production was 2.2% lower on the year. Leading indictors
do not point to any significant recovery soon.

The Bank of France estimates that domestic industry expanded
slightly in January and could stabilize in the weeks ahead. But the
factory PMI poll showed output still contracting slightly (49.3) and new
orders falling faster (45.7). Insee’s sector survey pointed to a further
erosion in production in January and a more rapid depletion of back
orders. Company output expectations fell to their lowest level since the
middle of last year.

While Italy’s industry output recovered 1.4% in December on a
rebound for capital goods, it was still 1.7% lower on the year and down
2.1% for 4Q.

Italy’s January factory PMI flagged further declines in output
(47.8) and new orders (44.8), though at a slower pace than in 4Q. Sector
morale eroded again last month to the lowest level in over two years,
reflecting weaker demand and output prospects, according to Istat.

In Spain, production recovered 0.9% in December, the first gain in
four months, and was 3.7% lower on the year. The PMI polls suggest that
industry bottomed out at the end of last year, and manufacturers polled
by the Commission in January were somewhat less pessimistic about
near-term output prospects.

Elsewhere, monthly production gains were limited to Finland
(+2.6%), Ireland (+2.5%), Slovenia (+0.5%) and Luxembourg (+0.4%).
Declines ranged from mild in Estonia (-0.6%) and Slovakia (-0.3%) to
severe in Greece (-2.4%) and Malta (-2.9%).

Compared to previous-year levels, output was lower everywhere
except for Finland (+1.5%) and Slovakia (+0.9%), with especially steep
falls in Portugal (-8.9%), Luxembourg (-9.6%) and Greece (-12.4%).

–Paris newsroom +331 4271 5540; e-mail: ssandelius@marketnews.com

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