Euro Area: Industrial production swings to contraction in December

Euro Area Industry December 2020

Euro Area: Industrial production swings to contraction in December

Industrial output fell a seasonally-adjusted 1.6% over the previous month in December, contrasting November’s 2.6% increase and marking the first drop in eight months. December’s fall reflected a downturn in the production of capital goods as well as a softer expansion in the production of intermediate goods. On the other hand, turnarounds were recorded in the production of durable consumer goods and energy, while the contraction in non-durable consumer goods production softened.

Looking at the individual economies for which data is available, industrial output contracted in eight countries, while it dropped in eight countries. Moreover, production increased in heavyweight Germany and Spain, while it contracted in France and Italy. Data for Ireland, which saw industrial production surge by over 50% in November and therefore influenced heavily December’s reading, was missing due to an ongoing review of the seasonal adjustment methodology.

On an annual basis, industrial production fell 0.8% in December, following November’s 0.6% decrease, which had and marked the softest drop since May 2019. Lastly, annual average variation in industrial production improved to minus 8.6% from November’s minus 8.8%.

Commenting on the release, Bert Colijn, Eurozone senior economist at ING, stated:

“Despite supply chain problems and the second wave of the coronavirus, manufacturing is showing resilience. New orders for manufacturing continue to grow quickly and the rest of the world continues to recover, which bodes well for the start of 1Q in terms of exports and production. With lockdowns being extended, domestic demand continues to weigh on the economy though. This makes manufacturing the bright spot in an otherwise downbeat short-term outlook.”

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