France, Italy and Ireland reported industrial production data for April today. In all three countries, contrary to expectations, industrial production declined from March. France was down 0.77%; Italy, 0.81% and Ireland, 3.26%. These declines following the announcement last week of a 2.27% decline in Germany's April industrial production are beginning to raise concerns that growth in the Euro Area may be peaking. The first chart, showing industrial production in Germany, France, Italy and Ireland over the past eight years puts the April decline in perspective. It appears to be significant in Ireland and Germany, but merely a ripple in France and Italy where industrial production has varied very little during this period.

The strength of the Euro, shown in the second chart, has dampened the demand for Euro Area exports of goods and services, and has undoubtedly affected the level of production adversely. Since exports of goods and services have amounted to 50% of Germany's GDP and roughly 30% of both France's and Italy's GDP, the rise in the euro has affected Germany's exports more than those of either France or Italy. In the first quarter national accounts, Net Exports of Goods and Services in Germany declined 1.16% while they increased 1.84% in France and 0.36% in Italy as shown in the third chart.

While exports are an important part of these economies, they are not the sole determinant of growth. It is too early, therefore, to suggest that Euro Area Growth is peaking on the basis of declines in industrial production that are largely due to a falling off in foreign demand. Domestic demand has begun to pick up and could offset some of the negative effects of a decline in exports.