In January, wholesale inventories fell by 0.7% M/M, while a decline by 1.0% M/M was expected. This is the fifth straight monthly decline which indicates that producers are cutting back inventories in order to bring it more in line with demand. The inventory/ sales ratio rose to 1.30 (from 1.27) which indicates that it would take 1.30 months at the current sales pace to use up the amount of goods on hand.
EMU: French industrial production drops sharply
French industrial production came out weaker than expected in January. On a monthly basis, French industrial production plunged by 3.1% M/M, while only a modest decline was expected. The sharp decline was due to another plunge in manufacturing (-4.1% M/M), while energy (-1.1% M/M) showed a more modest decline and construction rose (0.5% M/M) slightly. Looking at the manufacturing sector, the decline was driven by a 15% drop in consumer goods and a 5.7% decline in the automobile industry. This significantly weaker than expected outcome raises expectations that also euro zone industrial production might come out lower than expected.
In Germany, the January trade balance showed a widening surplus. The trade surplus rose from an upwardly revised 7.3B in December to 8.5B in January. The breakdown shows a 4.4% M/M drop in exports, while imports fell by a more modest 0.8% M/M. On a yearly basis, exports are down by 18.4% Y/Y. The slump in exports is expected to persist in the coming months and therefore net exports are expected to remain a drag on growth in the first quarter of 2009.
Other: UK industrial production weakens further
In the UK, industrial production dropped by 2.6% M/M in January, while the consensus was looking for decline of 1.2% M/M. Looking at the details, manufacturing remained extremely weak (-2.9% M/M) and also mining and quarrying dropped sharply (-3.0% M/M). On a yearly basis, industrial production is down by 11.4% Y/Y in January. These data confirm that production will remain a serious drag on growth in the first quarter of 2009.
