Summary: Euro-zone industrial production down 1.1% in July, worse than expected; down 2.2% on annual basis; annual growth rate decreases from -1.0% to -2.2%; German, French 10-year yields hardly move; output contracts in two of four largest euro 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 recent quarters have generally stagnated in trend terms.
According to the latest figures released by Eurostat, euro-zone industrial production contracted by 1.1% in July on a seasonally-adjusted and calendar-adjusted basis. The result was worse than the 0.9% contraction which had been generally expected and in contrast to June’s 0.5% rise. The calendar-adjusted contraction rate on an annual basis accelerated, from June’s revised rate of -1.0% to -2.2%.
German and French sovereign bond yields barely moved on the day. By the close of business, the German 10-year bond yield had returned to its starting point at 2.4% while the French 10-year bond yield finished 1bp higher at 3.19%.
Industrial production contracted in two of the euro-zone’s four largest economies. Germany’s production fell by 1.6% over the month while the comparable figures for France, Spain and Italy were +0.8%, +0.2% and -0.7% respectively.