July preliminary: +0.6% m/m, -2.3% y/y

MNI survey median: -0.1% m/m, -3.3% y/y
MNI survey range: -0.4% to +0.5% m/m

June unrevised: -0.6% m/m
May unrevised: +0.9% m/m
April unrevised: -1.1% m/m
March unrevised: -0.1% m/m
February unrevised: +0.7% m/m
—

PARIS (MNI) – Eurozone industry output surprised to the upside in
July, as gains in most countries offset declines Spain, Italy and the
Netherlands, Eurostat said Wednesday.

The 0.6% increase retraced the downturn in June, leaving output
2.3% lower on the year and some 10% below pre-crisis peaks in 2008, but
still 0.5% above the 2Q average, which had fallen 0.5% on the quarter.

Monthly trends were mixed across categories, with output gains for
intermediate goods (+0.1%) and especially capital goods (+2.4%)
offsetting declines for consumer durables (-0.5%), non-durables (-0.6%)
and energy (-1.2%).

Annual comparisons showed gains only for energy (+0.3%). Declines
were largest for consumer durables (-9.4%) and smallest for capital
goods (-0.9%).

Although seasonally adjusted, the upturn in July should still be
taken with a grain of salt, as work may have been brought forward in
some countries ahead of planned vacations in August.

Leading indicators for industry are in any case not promising, even
if the slide in sentiment has slowed somewhat, suggesting the sector may
be bottoming out. Output expectations eroded further in August,
according to the European Commission’s barometer, but this largely
reflected a sharp setback in Spain; in most other countries expectations
stabilized or recovered somewhat.

If Belgian manufacturing sentiment can be seen as a bellwether for
the Eurozone, then its recovery since June is reassuring. The factory
PMIs also appear to have found a floor (several stories below ground) in
most major economies except Italy.

However, there is no sign of an upturn on the horizon. The August
PMI showed new factory orders still falling at a rapid pace (43.7) and
export orders alone in ever steeper decline (44.7). With global growth
losing momentum and domestic demand throttled by austerity measures, it
is difficult see where impulses for recovery could come from – apart
from the ECB.

German industry output surprised on the upside in July with a 1.3%
rebound despite a sharp downturn for energy. Along with the modest
upturn in manufacturing orders, this appeared to dispel some of dark
clouds hanging over industry. Yet domestic producers remain to be
convinced, as suggested by the ongoing erosion in near-term production
prospects seen in the Ifo institute’s surveys.

French industry also managed an unexpected recovery in July, with a
0.3% upturn on the back of stronger gains in manufacturing alone. Yet
producers here are much more pessimistic than their German neighbors,
Insee’s surveys show. The Bank of France’s last survey pointed to a
contraction ahead, as gains in most branches would be offset by the
ongoing skid in the car industry.

Spanish production slipped another 0.2% in July, the sixth monthly
decline since the start of the year, and was 5.4% lower on the year.
Leading indictors here are mixed. The PMI polls signaled a trough in
June and a flatter decline in output and orders through August, with a
notable improvement for foreign demand. The Commission’s surveys, by
contrast, show little recovery in export order books and a further
deterioration in total orders and especially near-term output prospects.

In Italy, output was also down 0.2% on the month to post the
steepest annual decline in the Eurozone (-7.3%) along with Estonia.
While hard data for industry orders showed an uneven recovery this
spring, the PMI polls signal little improvement in the meantime. Istat’s
surveys show sector sentiment stabilizing at a low level in August, with
a less negative assessment of orders offset by weaker output
expectations.

Most of the smaller reporting countries posted gains in July, led
by Greece (+1.8%), Portugal and Slovakia (both +1.5%), Ireland (+1.0%),
Finland (+0.9%) and Estonia (+0.5%). Monthly declines were limited to
Malta (-0.5%), the Netherlands (-0.8%) and Slovenia (-2.3%).

Annual comparisons were mixed, with declines in Portugal (-0.1%),
Greece (-5.3%) and Estonia (-7.3%) and gains in Finland (+1.2%),
Slovenia (+1.9%), Malta (+2.9%), Ireland (+5.1%) and Slovakia (+18.4%).

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

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