Industrial output (excluding construction) fell in the EMU in June, dropping by 0.4%. This is the second consecutive monthly drop. These drops follow a monthly gain of just 0.1% in April. IP in the EMU has been steadily decelerating as it rose by 1.3% over 12 months, at a 0.1% annual rate over six months but now is falling over three months at a 2.2% annual rate.

All three major categories of manufacturing output show a steady deceleration in output over these same horizons: consumer goods output, intermediate goods output and capital goods output. However, the chart of year-over-year growth rates looks more equivocal since the year-over-year growth rates have been far from stable.

In the quarter to date (which is the recently completed second quarter), trends are more tangled. Overall IP is lower with output falling at a 0.9% annual rate. But manufacturing IP is up at a 0.7% annual rate. Sector growth rates are positive for capital goods and consumer goods, but output is falling for intermediate goods.

Country level detail shows IP falling in seven of the 10 EMU member countries in the table. This number is up sharply from the past two months when IP fell in just three or four of the member countries in the table.

The drop in German IP was the first surprise for this month. But the next two largest EMU members, France and Italy, joined Germany to report IP declines. In June only Finland, where the industrial sector has been troubled, Spain and tiny Malta show output increases.

The global economy continued to sputter during this period. China was showing signs of slowing and of weaker global demand. Now China has dropped its currency sharply in a bid to get a larger share of the already slow-growing global pie. China's currency depreciation will put more pressure on its trading partners that already are struggling. China's domestic demand weakness has already hit the German economy hard. Now there is more to come.