Eurozone Industrial Production Falls Most In 17 Months

(RTTNews) - Eurozone industrial production declined at the fastest pace in nearly one-and-and-a-half years in March, largely led by a slump in the capital goods output, and suggested that a downward revision to the first quarter economic growth was likely.

Industrial production logged negative monthly growth of 4.1 percent in March, reversing a 1.56 percent gain in February, preliminary data from Eurostat showed on Monday. That was above the 2.5 percent fall economists had expected.

"The decline in March brings industrial production back to the lowest reading since October 2021," Bert Colijn, an economist at ING, said.

The downward trend was largely influenced by a sharp fall in the computer, electronics, and optical products industries in Ireland, the economist observed.

The outlook for industry looks feeble for the months ahead, Colijn said, adding that weak demand remains a concern across the board even as lower energy costs offer a clear boost to the more energy-intensive industries.

Among euro area countries, Ireland logged the biggest fall of 26.3 percent as the country's statistical office CSO is undertaking a review of the seasonal adjustment methodology for industrial production.

Germany logged the biggest fall among the big four of Eurozone. Production shrunk 3.1 percent in the biggest euro area economy.

France registered a production decline of 1.1 percent and output fell 0.6 percent in Italy. In Spain, production grew 1.4 percent.

Production of capital goods decreased the most, by 15.4 percent monthly in March versus a 2.0 percent growth a month ago.

Automobiles contributed only a part of this, Capital Economics economist Andrew Kenningham said. A massive 91.8 percent drop in output of "computers and peripheral equipment" was to blame, the economist pointed out.

"We would not read too much into one month's data but with the tailwinds from lower energy prices and easing semiconductor shortages apparently exhausted and the economy struggling with tighter monetary policy, we expect industrial output to contract slightly over the rest of the year," Kenningham said.

Both the output and new orders components of the Manufacturing PMI fell to well below the 50 no-change mark in April, the economist observed.

Euro area dodged a recession in the first quarter that was widely anticipated a few months ago, thanks to the slowing energy price growth, fiscal stimulus and unwinding zero-Covid policy in China.

Gross domestic product grew 0.1 percent in the first quarter after staying flat in the preceding period.

Intermediate goods production contracted 1.8 percent, and energy output dropped 0.9 percent after a 0.7 percent rebound in February, Eurostat data revealed. Output of non-durable consumer goods also declined by 0.8 percent.

The only division that showed positive growth was durable consumer goods output, which rose 2.8 percent over the month.

On a yearly basis, industrial production fell 1.4 percent in March, in contrast to a 2.0 percent increase seen in the prior month. Meanwhile, economists had forecast an annual increase of 0.9 percent.

The EU27 industrial production slid 3.6 percent monthly and by 1.3 percent annually at the end of the first quarter.