Oct preliminary: -0.1% m/m, +1.3% y/y

MNI survey median: -0.3% m/m, +2.3% y/y
MNI survey range: -3.0% to +0.3% m/m

September: -2.0% m/m (unrevised)
August: +1.3% m/m (revised from +1.4%)
July: +0.9% m/m (revised from +1.0%)
June: -0.6% m/m (unrevised)
May: +0.1% m/m (revised from +0.2%)
—

PARIS (MNI) – Eurozone industrial output was slightly weaker in
October, reflecting mixed results across countries and categories of
goods, Eurostat said Wednesday.

The 0.1% monthly downturn left output 1.3% higher on the year but
still more than 7% below pre-crisis peaks. Following the steep setback
in September, production in October was 0.9% below the 3Q average,
pointing to a weak 4Q after a 0.7% average gain in 3Q.

Analysts’ forecasts were mixed as well, pointing on balance to a
somewhat largely monthly decline.

Monthly output gains were limited to capital goods (+1.2% after
-3.9% in September) and consumer non-durables (+0.6% after -1.4%).
Further declines were posted for intermediate goods (-0.8% after -2.2%),
consumer durables (-0.4% after -3.4%), and energy (-0.9% after -1.6%).

Capital goods output has been the most dynamic over the past 12
months (+5.3%), far out-distancing intermediate goods (+0.4%) and
consumer non-durables (+0.9%). Consumer durables output was lower on the
year (-2.1%), as was energy production (-5.1%).

Leading indicators for industry are anything but promising, but
they vary in their degree of pessimism. New orders plunged 6.4% in
September, giving a 2.5% drop for 3Q.

The factory PMI polls suggest that output was stagnant in 3Q and
contracted at an accelerating pace through November (45.7). New orders
declined from June onward, sustaining their steepest drop in two and a
half years in November (42.4).

Less alarming, the European Commission’s surveys show industry
losing steam rapidly in recent months. Firms polled in November said
recent output was well below average, and they expected the downward
trend to continue. If their assessment of order books was still slightly
above average, this was thanks largely to the cushion of backlogs in
Germany. Order book levels were judged favorably in France and Belgium
as well, but negatively everywhere else.

The sector contraction appears mild at this stage, but order trends
indicate it will deepen in the near term. This could easily trigger a
retrenchment in investment that would accentuate the cyclical downturn
and delay an eventual recovery. On balance, firms expect a mild decline
in nominal investment next year, according to the Commission survey. The
result was skewed downward by an especially steep drop foreseen in
Italy.

Foreign demand is waning and domestic demand is likely to remain
anemic at least until middle of next year, the OECD suggested last
month: “Consumption growth will slow as households undertake
precautionary saving, investment will be weak as projects are put on
hold and financing becomes scarcer, and global weakness will hurt export
growth.”

German industry managed a feeble 0.8% recovery in October, but
after the 2.9% drop in September, two-month results were still down 2.7%
from the previous two months. Despite the rebound in orders in October,
manufacturers’ outlook for the six months ahead continues to
deteriorate, the Ifo institute’s surveys show. Last week the DIW think
tank forecast a contraction in industry output in the winter half year.

In France output was stagnant in October as a recovery in the auto
and high tech sectors was offset by declines in most other branches.
With foreign orders falling and stocks rising, manufacturers surveyed by
Insee in November revised down their own production expectations again
to a 16-month low well below average. Last week the Bank of France
forecast stable industry output in the short term, noting that
inventories appear at normal levels and order books “slightly” fuller
than normal.

After a 4.6% downturn in September, output in Italy slipped another
0.9% to a 19-month low, 4.2% below the previous-year level.
Manufacturers polled by Istat in November were more pessimistic about
recent production and orders trends and remained negative on output in
the near term. Sector sentiment fell to a 21-month low.

In Spain, production fell another 1.1% after a 1.2% downturn in
September to stand 4.0% lower on the year. Manufacturers polled by the
Commission in November said that output and orders had fallen off
sharply and were more pessimistic about near-term prospects.

Elsewhere, monthly results were mixed as well, with gains in
Ireland (+6.6%), Estonia (+2.9%), Slovakia and Malta (both +0.9%) and
Portugal (+0.7%) offsetting declines in Greece (-4.4%), Luxembourg
(-3.6%), Slovenia (-2.3%), Finland (-1.3%) and the Netherlands (-0.7%).

Over the previous 12 months, recoveries of differing strength were
posted in Ireland (+12.2%), Slovakia (+7.8%), Estonia (+2.3%), Slovenia
(+1.0%), Portugal (+0.6%) and Malta (+0.3%). Annual declines were seen
in Greece (-12.4%), Luxembourg (-11.3%), Finland (-6.0%) and the
Netherlands (-2.0%).

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

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