German production slumps, drags euro-zone output down in August

Summary: Euro-zone industrial production slumps 1.6% in August, fall slightly less than expected figure; annual growth rate falls to 5.1%; now 1.5% below pre-pandemic peak output; production down in two of euro-zone’s four largest economies, Germany down significantly.

Following a recession in 2009/2010 and the debt-crisis which flowed from it, euro-zone industrial production recovered and then reached a peak four years later in 2016. Growth rates then fluctuated for two years before beginning a steady and persistent slowdown from the start of 2018. That decline was transformed into a plunge in March and April of 2020 which then took over a year to claw back.

According to the latest figures released by Eurostat, euro-zone industrial production slumped by 1.6% in August on a seasonally-adjusted and calendar-adjusted basis. The fall was not quite as large as the 1.7% decrease which had been generally expected and it was in contrast to July’s 1.4% jump after revisions. On an annual basis, the calendar-adjusted growth rate slowed from July’s revised rate of 8.0% to 5.1%.

“Euro-area industrial production is now 1.5% below its pre-pandemic peak and so far the contribution from the industrial sector to GDP in Q3 is looking flat,” said ANZ economist Daniel Been.

German and French sovereign bond yields fell moderately on the day. By the close of business, the German 10-year bund yield had lost 3bps to -0.13% and the French 10-year OAT yield had shed 4bps to 0.20%.

Industrial production growth contracted in two of the euro-zone’s four largest economies but production in Germany, the largest of the four, contracted significantly. Germany’s production contracted by 4.1% while the comparable figures for France, Italy and Spain were +1.0%, -0.2% and +0.1% respectively.

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