September’s 0.5 per cent fall in eurozone industrial output to weigh on overall Q3 growth

LONDON – Industrial output across the 17-country eurozone fell a monthly rate of 0.5 per cent in September, official figures showed Wednesday, a decline that has stoked speculation that economic growth across the region may have come to a standstill in the third quarter.

The fall reported by Eurostat, the EU’s statistics office, was slightly larger than expected and means the sector weighed on third-quarter growth. September’s fall follows a 1 per cent rise in August that only compensated for an equivalent decline in July.

“Overall, today’s industrial production data underline that, while the eurozone as a whole is returning to growth, the recovery will be very slow and halting,” said Paul Hollingsworth, assistant economist at Capital Economics.

The decline during the month was largely due to falls in the core economies of Germany and France. There was some better news in some of the countries in the so-called periphery. Spain, for example, posted its first annual growth rate in industrial output in two years, a further sign it has emerged from recession.

The industrial figures come a day ahead of the first estimate for third-quarter growth. Until the release, most economists thought the eurozone would eke out a second straight quarter of growth following its longest-ever recession. The consensus in the markets is that it grew a paltry 0.2 per cent compared with the previous quarter, down on the previous quarter’s 0.3 per cent.

The prospect of a slow grind ahead, as well as below target inflation, is one of the reasons why the European Central Bank cut its main interest rate last week to a record low of 0.25 per cent.

“The region is expected to grow modestly in the second half of 2013 before the pace picks up gradually in coming years,” said Anna Zabrodzka, economist at Moody’s Analytics. “The poor state of public finances in the periphery is still a concern, and risks remain weighted to the downside.”