After rising by almost 1% in July, industrial production fell by 1.8% in August. While a partial rebound is likely in September, this will not be large enough to offset the August fall. Over the quarter, industrial output has probably contracted.
Following the releases of national figures, there were no doubts regarding the August evolution of industrial production for the eurozone. The uncertainty was just limited to the magnitude of the contraction. According to Eurostat, output contracted by 1.8% m/m, slightly below expectations (the consensus was for -1.7% m/m). Production of capital and intermediate goods markedly fell (down by almost 5% and 1% respectively), output of durable and non-durable goods was almost stable, while production of energy rebounded.
German’s poor performance was the main factor behind this poor reading. German output fell by more than 4% m/m. Given its tight economic links with Eastern Europe, the ongoing tensions with Russia clearly weighed on German activity. Yet, according to the German Ministry of Economics, calendar effects probably contributed to the fall as well. This year, indeed, summer school holidays were mainly concentrated in August, while normally they tend to finish in mid- August. Therefore, while the ongoing momentum in the industrial sector is everything but buoyant, a rebound of German output is likely in September. This expected increase in September should cause a positive reading for the eurozone as a whole in September. Yet, its magnitude will not be large enough to offset the August fall. In order to have a flat quarter-on-quarter growth rate in Q3, eurozone industrial output would have to increase by more than 2% m/m in September, something that seems very unlikely given what is suggested by survey data. The order-to-inventory ratio, which tracks relatively well industrial output (see chart), is definitively losing momentum.
Industrial production and survey data clearly point to a very subdued outlook for the eurzone for Q3 (Eurostat will release the preliminary Q3 GDP growth estimates in mid-November). Some relief comes from retail sales which jumped by more than 1% in August. Assuming zero growth in September, they would have been up by 0.7% q/q in Q3, running almost twice as fast as in Q2 (+0.3% q/q). We continue to expect positive GDP growth in Q3, although it will not be much different from zero.
BNP Paribas is regulated by the FSA for the conduct of its designated investment business in the UK and is a member of the London Stock Exchange. The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty, express or implied, is made that such information is accurate or complete and it should not be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other investment. Information and opinions contained in the report are published for the assistance of recipients, but are not to be relied upon as authoritative or taken in substitution for the exercise of judgement by any recipient, they are subject to change without notice and not intended to provide the sole basis of any evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. No BNP Paribas Group Company accepts any liability whatsoever for any direct or consequential loss arising from any use of material contained in this report. All estimates and opinions included in this report constitute our judgements as of the date of this report. BNP Paribas and their affiliates ("collectively "BNP Paribas") may make a market in, or may, as principal or agent, buy or sell securities of the issuers mentioned in this report or derivatives thereon. BNP Paribas may have a financial interest in the issuers mentioned in this report, including a long or short position in their securities, and or options, futures or other derivative instruments based thereon. BNP Paribas, including its officers and employees may serve or have served as an officer, director or in an advisory capacity for any issuer mentioned in this report. BNP Paribas may, from time to time, solicit, perform or have performed investment banking, underwriting or other services (including acting as adviser, manager, underwriter or lender) within the last 12 months for any issuer referred to in this report. BNP Paribas, may to the extent permitted by law, have acted upon or used the information contained herein, or the research or analysis on which it was based, before its publication. BNP Paribas may receive or intend to seek compensation for investment banking services in the next three months from an issuer mentioned in this report. Any issuer mentioned in this report may have been provided with sections of this report prior to its publication in order to verify its factual accuracy. This report was produced by a BNP Paribas Group Company. This report is for the use of intended recipients and may not be reproduced (in whole or in part) or delivered or transmitted to any other person without the prior written consent of BNP Paribas. By accepting this document you agree to be bound by the foregoing limitations. Analyst Certification Each analyst responsible for the preparation of this report certifies that (i) all views expressed in this report accurately reflect the analyst's personal views about any and all of the issuers and securities named in this report, and (ii) no part of the analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed herein. United States: This report is being distributed to US persons by BNP Paribas Securities Corp., or by a subsidiary or affiliate of BNP Paribas that is not registered as a US broker-dealer, to US major institutional investors only. BNP Paribas Securities Corp., a subsidiary of BNP Paribas, is a broker-dealer registered with the Securities and Exchange Commission and is a member of the National Association of Securities Dealers, Inc. BNP Paribas Securities Corp. accepts responsibility for the content of a report prepared by another non-US affiliate only when distributed to US persons by BNP Paribas Securities Corp. United Kingdom: This report has been approved for publication in the United Kingdom by BNP Paribas London Branch, a branch of BNP Paribas whose head office is in Paris, France. BNP Paribas London Branch is regulated by the Financial Services Authority ("FSA") for the conduct of its designated investment business in the United Kingdom and is a member of the London Stock Exchange. This report is prepared for professional investors and is not intended for Private Customers in the United Kingdom as defined in FSA rules and should not be passed on to any such persons. Japan: This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited, Tokyo Branch, or by a subsidiary or affiliate of BNP Paribas not registered as a financial instruments firm in Japan, to certain financial institutions permitted by regulation. BNP Paribas Securities (Japan) Limited, Tokyo Branch, a subsidiary of BNP Paribas, is a financial instruments firm registered according to the Financial Instruments and Exchange Law of Japan and a member of the Japan Securities Dealers Association. BNP Paribas Securities (Japan) Limited, Tokyo Branch accepts responsibility for the content of a report prepared by another non-Japan affiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited, Tokyo Branch. Hong Kong: This report is being distributed in Hong Kong by BNP Paribas Hong Kong Branch, a branch of BNP Paribas whose head office is in Paris, France. BNP Paribas Hong Kong Branch is regulated as a Licensed Bank by the Hong Kong Monetary Authority and is deemed as a Registered Institution by the Securities and Futures Commission for the conduct of Advising on Securities [Regulated Activity Type 4] under the Securities and Futures Ordinance Transitional Arrangements. Singapore: This report is being distributed in Singapore by BNP Paribas Singapore Branch, a branch of BNP Paribas whose head office is in Paris, France. BNP Paribas Singapore is a licensed bank regulated by the Monetary Authority of Singapore is exempted from holding the required licenses to conduct regulated activities and provide financial advisory services under the Securities and Futures Act and the Financial Advisors Act. © BNP Paribas (2011). All rights reserved.
Recommended Content
Editors’ Picks
EUR/USD holds above 1.0650 after US data
EUR/USD retreats from session highs but manages to hold above 1.0650 in the early American session. Upbeat macroeconomic data releases from the US helps the US Dollar find a foothold and limits the pair's upside.
GBP/USD retreats toward 1.2450 on modest USD rebound
GBP/USD edges lower in the second half of the day and trades at around 1.2450. Better-than-expected Jobless Claims and Philadelphia Fed Manufacturing Index data from the US provides a support to the USD and forces the pair to stay on the back foot.
Gold is closely monitoring geopolitics
Gold trades in positive territory above $2,380 on Thursday. Although the benchmark 10-year US Treasury bond yield holds steady following upbeat US data, XAU/USD continues to stretch higher on growing fears over a deepening conflict in the Middle East.
Ripple faces significant correction as former SEC litigator says lawsuit could make it to Supreme Court
Ripple (XRP) price hovers below the key $0.50 level on Thursday after failing at another attempt to break and close above the resistance for the fourth day in a row.
Have we seen the extent of the Fed rate repricing?
Markets have been mostly consolidating recent moves into Thursday. We’ve seen some profit taking on Dollar longs and renewed demand for US equities into the dip. Whether or not this holds up is a completely different story.