EMU industrial production gained 1.2% in December after rising by 2.4% in November- a clear solid gain and offset after October's drop of 1.5% and a run of four previous months in which output fell in three of four months. In 2021, output declined in 5 of 12 months; it was a mixed year for manufacturing despite there being a solid net gain for output of 1.5%. All sectors saw year-on-year gains except for capital goods where output declined by 2.4% over 12 months.
Overall output is not accelerating in a formal statistical sense, but output in manufacturing is over that hurdle with solid growth of 1.7% over both 12 months and six months that steps up to a pace of 10% over three months.
The annotations in the table track the EMU manufacturing PMI. It has been somewhat erratic and is lower in December and was lower in October, but it rose in November. The PMI fell on balance over six months and three months but is stronger over 12 months.
The quarter-to-date column is now for the completed fourth quarter that shows a decline in activity despite a strong final two months. This calculation (to remind you...) is executed on the Q3 quarterly average for the IP index vs. the Q4 average (it is not a three-month change). Weakness late in Q3 helped to depress the level for output in Q4 despite two strong monthly gains, leaving the average level in Q4 below the level in Q3. Manufacturing output also is weaker in Q4, falling at a 1.5% pace. The weakness is mostly on the back of weak consumer goods output and that is due to weak consumer nondurables output.
By sector, consumer goods show sequential weakness created mostly by weakness in nondurable goods. Intermediate goods are without a formal trend- but do show a very strong gain over three months. Capital goods show a strong rising trend accelerating from 12-months to six-months to three-months and running at a double-digit growth rate of 22.8% over three months.
All sectors in the EMU have recovered relative to their pre-Covid levels of activity. All are showing gains, albeit small ones over that nearly two-year period.
Country trends The table also presents manufacturing IP data for 12 EMU members and two non-EMU members. Unlike the overall sector data for the EMU, some countries have not fully recovered from their Covid setback. Among the 12 EMU members, six still have output trailing its level of February 2020 before Covid struck. One of the two non-members (Norway) is also weaker on balance. Among those members that are weaker on balance are Malta, Germany, France, Portugal, Luxembourg, and Spain.
On the month only four countries report weaker IP and three of those are EMU members: Austria, Italy, and Malta. Five EMU members showed declines in November and three showed declines in October.
EMU member growth is solid over various periods as well with only three members that are net weaker over 12 months, four weaker on balance over six months and three showing declines over three months. However, in the quarter-to-date, there are six EMU members that show output declining relative to the third quarter.
The chart at the top shows output is getting past its rundown deceleration phase in the wake of its Covid hammering then explosive rebound. But this is a nascent rebound. Capital goods, a sector that was hit hard, is now gathering a strong rebound. It has monthly growth of more than 1% for three months running. That is more impressive than having growth promoted by a single explosive month. Other indicators also suggest that investment demand may be picking up. In the early stages of Covid recovery, there was so much slack that capital investment was not on the front burner. Now, as supply issues continue to loom and demand continues firms, apparently, are ready to commit to new investment again for something other than hand-to-mouth survival.
