Eurozone industrial production rose less than economists had expected in June, raising questions about how soon the nascent recovery in the bloc’s pandemic-stricken economy will run out of steam.
The 9.1 per cent rise in eurozone factory output in June showed that the region’s manufacturers are bouncing back from the heavy blow of the coronavirus pandemic.
But the rebound was less than the 10 per cent consensus forecasts of economists surveyed by Reuters. Following a record 12.4 per cent increase in May, Eurostat said industrial production was still down more than 12.3 per cent from a year ago, underlining how the region’s factories are struggling to recover fully from the pandemic.
“The factory orders are still way off where we were before the crisis, so we need quite a lot more just to catch up,” said Anatoli Annenkov, economist at Société Générale.
Economists said that once national lockdowns were lifted and factories reopened in April and May a rebound in industrial production this summer could be expected, boosted by pent-up demand.
But they were sceptical that it was sustainable, pointing out that the weakness of the global economy would continue to weigh on exports, as would trade tensions, uncertainties about Brexit and the strengthening of the euro.
“July is going to be positive for industrial production, even August will too,” said Katharina Utermöhl, economist at Allianz. “But after the summer, this is when the real work will start.”
“Even leaving aside the risk of a second wave of infections, there won’t be the tailwinds of pent-up demand,” said Ms Utermöhl. “But there will also be the headwinds of an uncertain global economic recovery and the strong euro hampering exports.”
The pandemic dragged the eurozone economy into a historic recession in the second quarter of this year, when gross domestic product fell by a record 12.1 per cent from the first quarter.
This summer, however, there have been faint signs that the eurozone’s industrial sector is recovering faster than expected. Purchasing managers’ indices pointed to a strong rebound in activity for manufacturers across the eurozone in July, increasing confidence that the region’s industrial output will rebound strongly in the third quarter.
A further boost came from the record almost 30 per cent jump in orders at Germany’s factories in June from a month earlier, as well as the 15 per cent rebound in German exports in the same month, boosted by increased trade with China.
“After May, more countries have opened up, so industrial production and exports are starting to pick up now,” said Carsten Brzeski, economist at ING. “But at the same time the US is still struggling with the virus and the UK is struggling with both the virus and Brexit — and both of these are key eurozone markets — which argues against a further strong rebound in exports.”
Overall production of consumer goods was the eurozone’s fastest-growing industrial sector in June, rising just over 20 per cent, while capital goods production rose 14.2 per cent — helped by the restarting of the region’s car production.
Intermediate goods production rose 6.7 per cent, while non-durable consumer goods rose 4.8 per cent and energy production 2.6 per cent.
