IP in Europe Shows Lethargy

In December, among ten reporting monetary union members, output increased for six of them and declined in four of them. In addition, two reporting European economies, Sweden and Norway, each showed increases in output in December. In November, five monetary union members showed decreases, while only two showed declines in October. The recent trends and data on industrial production are not exactly friendly, but neither are they scathing results. In December, the median change in the monetary union was a 0.1% increase in manufacturing output following a 0.9% median drop in November and a 0.3% median increase in October.

For the full set of reporting countries, 60% showed acceleration in December, about the same as in October. However, in November only 23% showed output accelerating on a month-to-month basis. Coupled with weak median results, the recent reports on industrial production are not particularly impressive.

Sequential results, looking at 12-month, to 6-month to 3-month growth rates, are disappointing as well. The 12-month growth rate puts the annualized median rise of manufacturing output at 2.2%, the 6-month annualized growth rate at -2%, and the 3-month growth rate at -2% for EMU member countries. For the full sample of countries, there is acceleration in 50% over 12 months, 61.5% of them over six months, and that drops down to 38.5% over three months.

In addition, these sequential data show that five reporting countries have persistent decelerations in output growth rates from 12-months to 6-months to 4-months. Those countries include France, the Netherlands, Spain, Greece, and Portugal. However, there are contrary accelerating trends in three reporting countries Malta, Sweden, and Norway; the latter two, of course, are not monetary union members but have various affiliations with the European trading bloc.

Quarter-to-date data (covering the completed fourth quarter) for the full sample show that five countries have output declining on balance in Q4. However, among monetary union members, the median change in the quarter is an annual rate of 1.1% increase in manufacturing industrial production.

Assessing the growth rates based on year-over-year growth in industrial output, only four countries in the sample have output growth rates below their historic medians on data back to 2006. Those are Austria, Germany, Luxembourg, and Malta. Other reporters have growth rates that rank above the 50% mark which puts them above their historic median. Sweden has a year-over-year growth rate in its 93.7 percentile; Norway has a growth rate in its 85.3 percentile; Greece, Portugal, and France have growth rates in their 70th percentiles, respectively.

The December news is not upbeat, but it is not dismal either. It suggests the same old industrial slog is still underway in Europe.