World Economy

Eurozone Factory Output Slowdown Continues

OECD says a sustained slowdown in the eurozone is under way.
OECD says a sustained slowdown in the eurozone is under way.

Industrial production in the eurozone fell more sharply than expected in April, resuming its 2018 decline after a March bounce and underlining doubts about the strength of the economy as the European Central Bank faces a big call on the future of one of its key stimulus programs.

The European Union’s statistics agency Wednesday said the output of factories, mines and utilities across the 19 countries that use the euro was 0.9% lower in April than in March, although 1.7% higher than a year earlier, MarketWatch reported.

That marked the fourth month in five in which industrial production has fallen. It was a sharper decline than had been anticipated, since economists surveyed by The Wall Street Journal last week estimated that output fell by 0.7%.

Each of the eurozone’s five largest members saw a drop in output, with the Netherlands experiencing the sharpest decline at 4.4%. While a slump in energy generation was largely responsible for the overall contraction, most manufacturing also retreated, the exception being the production of tools and equipment.

While the eurozone economy grew at an annualized rate of 2.8% in the final three months of last year, it managed an expansion of just 1.5% in the first three months of this year. A drop in industrial output—which accounts for a quarter of the eurozone economy—was one of the factors behind that slowdown.

Rapidly rising factory output was one of the main drivers of the eurozone economy’s surprisingly strong performance in 2017, when it recorded its fastest growth in a decade. If sustained, weakening output would make it difficult for the economy to expand at a similar rate this year.

Eurozone may be suffering from a loss of business confidence in response to mounting tensions with the US government over trade, a threat to growth that ECB President Mario Draghi flagged in an April news conference.

Leading indicators released by the Organization for Economic Cooperation and Development Wednesday suggest a sustained slowdown is under way. Based on a variety of data series that have a history of anticipating swings in future economic activity, the measures now point to easing growth in Germany, France, Italy and the eurozone as a whole.


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