Summary: Euro-zone industrial production down 2.0% in October, fall greater than expected; annual growth rate drops from 5.1% to 3.4%; “another indication” of euro-zone recession ahead; German, French 10-year yields up modestly; contraction in all four largest economies.
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. Production levels in more-recent months have generally stagnated in trend terms.
According to the latest figures released by Eurostat, euro-zone industrial production contracted by 2.0% in October on a seasonally-adjusted and calendar-adjusted basis. The fall was a greater one than the 1.3% decrease which had been generally expected and in contrast with September’s 0.8% gain after revisions. The calendar-adjusted growth rate on an annual basis decreased from September’s revised rate of +5.1% to +3.4%.
ANZ economist John Bromhead described the result as “another indication of a recession ahead.”
German and French sovereign bond yields moved modestly higher on the day. By the close of business, the German 10-year bund yield had added 2bps to 1.94% while the French 10-year OAT yield finished u3bps higher at 2.43%.
Industrial production contracted in all four of the euro-zone’s four largest economies. Germany’s production contracted by 0.9% over the month while the comparable figures for France, Spain and Italy were -2.6%, -0.4% and -1.0% respectively.