Eurozone industrial production ticked down in May
Industrial production in the eurozone continues to trudge along at a sluggish pace without clear direction. The Middle East war has not caused a large decline in production, but recent optimism is not yet reflected in strength in output either.
Industrial production in the eurozone declined by 0.2% in May (vs +0.1% in April). This is a modest move which still leaves production above the February level, when the war in the Middle East started. The decline was mainly driven by a drop in durable consumer goods production, which has been a more negative driver of production in recent months.
By country, this has been a mixed bag. Sharp declines in Ireland and more modest falls in Italy and France were offset by rising production in Germany and Spain, leaving no clear underlying trend for now.
Despite disruption, production seems to have been held up in recent months by businesses increasing inventories to counter possible supply chain disturbances from the Middle East war. But also from relatively better production conditions compared to Asia in the first months of the war and from the structural increase in defence spending.
This keeps manufacturing production decent for the moment and also results in some muted optimism about the outlook despite continued uncertainty around the Middle East conflict. Then again, real optimism is not reflected in current production figures so far.
Hopes for more geopolitical stability, lower energy prices and strong public investment seem to drive optimistic views for now. The latter seems more of a sure bet than the first two, with Middle East uncertainty back on the table.
Author
Bert Colijn
ING Economic and Financial Analysis
Bert Colijn is a Senior Eurozone Economist at ING. He joined the firm in July 2015 and covers the global economy with a specific focus on the Eurozone.
