Industrial Output in EMU/Europe Remains Distressed

Industrial output in Europe continues to be challenged in March. The median percentage change for the early reporting European Monetary Union members shows a drop of 1.1% following a gain of 1% in February and a drop of 1.7% in January. There are still net declines over three months, over six months, and over 12 months for the median, based on the grouping of countries in the table.

Of the 14 European economies listed in the table, 11 of them show month-to-month declines in industrial production in March. That is very substantial breadth. The countries showing increases in March are Luxembourg, Spain, and Finland. Among the rest of the countries, industrial production declines show small drops only in Norway and Italy where IP sheds just of 0.4% month-to-month; all the rest of the declines are month-to-month declines of one full percentage point or more (nine in all).

The median calculation shows a steady pace of decline over three months, six months, and 12 months at annual rates. The decline over 12 months is 1.2%; the decline over three and six months, in both cases, is at -1.3%. Over three months, six of the 12 European monetary union economies are showing declines in industrial production; eight of them show declines over six months and seven show declines over 12 months. The breadth underlines that output trends remain consistent across each of these spans.

For the quarter-to-date, which is for the first quarter, since March data complete the quarterly results, a decline in the median of -0.4% is indicated. There are declines in six of the reporting European Monetary Union economies in the first quarter (QTD).

The manufacturing PMI for the entire European Monetary Union shows month-to-month declines in March and February although it shows a net rise over three months juxtaposed against net declines over six months and 12 months.

Manufacturing conditions continue to show a great deal of distress. Some of the more recent economic reports have showed some indications of firmness in the service sectors of these economies. The manufacturing sectors, however, continue to be distressed in Europe and globally.

Inflation continues to run hot and central banks continue to raise rates to try to keep inflation at bay and to push it back down toward its target. Inflation overshoots in Europe and in the United States are relatively severe while Japan, having fought deflation for such a long time, is much less concerned about its current moderate inflation overshoot. However, the relevance is that inflation is high and that central banks are raising rates to combat that. With industrial production already so widely weak the prospects for future growth are dimming. Markets continue to flirt with talk of a soft landing while the data seem to suggest that a soft landing is an ever more elusive possibility.