Eurozone output subdued after only a slight rebound from August’s dip

September’s 0.2% rise in industrial production shows output has stayed flat since April, when the US frontloading surge tapered off. While businesses show optimism, we think caution on the short-term manufacturing outlook is warranted.

The muted recovery in September following a -1.1% decline in August was in part due to the traditional volatility of Irish data (-9.4% after a 9.5% increase in August). More importantly, Germany only partially offset its August decline. Most large producing countries experienced a better recovery from August weakness; Italy and Spain made up for last month’s losses, and France almost did too.

The overall eurozone trend since the US announced the increase in tariffs in April has been flat, as production is now just 0.2% higher. On the plus side, this means that a large drop in production due to tariffs hasn’t materialised. In fact, production levels remain higher than on average in 2024. This indicates that manufacturing production has moved into a slightly higher gear, but at the same time, we also don’t see any growth at this level. Large public investment plans are not yet causing a meaningful acceleration of activity at this point.

Manufacturers remain relatively optimistic about the months ahead. Production expectations are improving as order book assessments have become less negative in recent months. And perhaps optimism is also fuelled by expectations of significant public investments in the quarters ahead. Then again, fierce global competition, a strong euro and the impact of US tariffs still playing out make us cautious about expecting a significant short-term revival of the sector.

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