Aug preliminary: +0.6% m/m, -2.9% y/y

MNI survey median: -0.5% m/m, -4.0% y/y
MNI survey range: -0.7% to +0.5% m/m

July unrevised: +0.6% m/m
June revision: -0.5% m/m (-0.6%)
May revision: +1.0% m/m (+0.9%)
April revision: -1.0% m/m (-1.1%)
March unrevised: -0.1% m/m

PARIS (MNI) – Eurozone industry output surprised to the upside
again in August, reflecting strong gains in several large economies
reported after most analysts had already released their forecasts a week
ago.

Preliminary estimates released Friday by Eurostat show a 0.6%
monthly rise in production, whereas most analysts had expected a modest
correction to the upturn in July. A few last-minute revisions extended
the forecast range into positive territory.

Output in August was still 2.9% below the previous-year level and
down some 10% from pre-crisis peaks in 2008. Two-month results show a
promising 1.0% gain from the 2Q average, which contracted 0.4% on the
quarter.

The back-to-back monthly expansion should be taken with a grain of
salt, as precise seasonal adjustments are especially difficult during
the summer vacation months.

Nearly all goods categories posted gains in August, led by consumer
durables (+3.9%) and non-durables (+1.3%), followed by energy (+0.9%)
and capital goods (+0.7%). Intermediate goods output was flat on the
month.

Annual comparisons showed energy output in line with the
previous-year level. Declines in all other categories were largest for
intermediate goods and consumer durables (both -4.9%) and smallest for
non-durables (-1.4%).

Leading indicators did not signal the upturn since June and
continue to point to sluggish activity ahead. Even if the PMI polls
appear to have lost some of their predictive value and have begun to
recover since July, they remain far below the threshold for expansion
for the Eurozone as a whole (46.1) and the larger economies.

In a broader survey by the European Commission, manufacturing
sentiment continued to erode in September, undermined by ever thinner
order books and weaker output expectations. Last week the national
statistics offices of France and Italy and Germany’s Ifo think tank
projected industry declines of 0.4% in both 3Q and 4Q and an anemic
recovery of 0.2% in 1Q.

French industry surprised on the upside again in August with a 1.5%
spurt after a 0.7% upturn since May. As the strongest gains were in the
auto sector, some analysts suspect assembly lines may have been shifted
into high gear in anticipation of industrial unrest this autumn. While
manufacturing output has been holding up fairly well, the steady drain
on order books, the loss of market shares and the compression of margins
to near historic lows suggest that firms lack the means for needed
innovative investment.

Production in Italy was also unexpectedly robust in August, with a
1.7% rebound that more than retraced the decline since May, but still
left output 5.2% lower on the year. Spanish production bounced back
nearly as fast with a 1.3% jump that reduced the annual decline to 3.2%.
In light of the depressed levels of sector sentiment and the
deterioration in producers’ assessment of order books in both countries,
a negative correction in output appears likely in the near term.

By contrast, German industry output contracted 0.4% in August after
a 1.3% upturn in July. The Economics Ministry signaled a modest downward
bias due to a holiday effect. While industry appears on track for a
positive 3Q print, the Ifo institutes surveys show producers’
medium-term expectations falling off rapidly.

Nearly all of the smaller reporting countries contributed to the
expansion in August, with monthly gains led by Portugal (+6.8%) and
Slovenia (4.0%). Greece posted a second month of strong gains (+2.5%
after +2.2%). Finland sustained a modest setback (-1.1%), while Irish
output was unchanged on the month.

Annual comparisons were mixed, with declines in Portugal and
Estonia (both -2.8%), the Netherlands (-1.8%), Finland (-1.6%) and
Ireland (-0.6%) and gains in Greece (+2.6%), Slovenia (+4.2%), Malta
(+4.7%) and Slovakia (+17.0%).

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

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