IP Plunges in Main EMU Countries and Beyond

The list of countries reporting steep declines in industrial output continues. In the quarter-to-date (a full quarter now since we have December data) the pace of decline is roughly at a 25% annual rate. And that is steep indeed. Among large economies only Spain saw a rise in IP in December, but that followed a drop of 9.4% in November. Spain’s monthly gyrations are extreme. Its Yr/Yr declines are bit more consistent and consistently weak.

But the BIG NEWS on the day may not have been these weak IP figures as much as the quote attributed to Bundesbank and ECB member Axel Weber who said that the ECB should not be worried about the long term impact of its moves since the economy in Europe was in ‘freefall.’ ‘Freefall’ was apparently the word that Weber himself used. He said the ECB should not worry about ‘lowering rates aggressively.’ This is key statement since last week with weak economic reports all around it, with inflation having fallen more than expected, and with the BOE cutting rates, the ECB chose to standstill. Barely a week later here comes Weber with his guns blazing urging more rapid rate cuts. This is a clear shift for Europe since up to this point there has been a bit more emphasis from the Germans, who tend to be the monetary conservatives, no longer so worried about the stubbornness of inflation. That position had been essentially a reference to the core rate. That concern now seems to have been set aside in favor of concern over the economy itself.