A noisy plunge of industrial activity - Rabobank

Analysts at Rabobank explained reasons for why full-2018 GDP growth estimate (+1.6%) risks are skewed to the downside.

Key Quotes:

"Industrial production plummeted 10.9% m/m (or 6.6% y/y) in May, reflecting the temporary impact from stoppages in the transportation system during the truckers’ strike.

Unsurprisingly, the details show an across the board hit amongst the industrial segments, with the diffusion index posting an all-time low of 9%. That means only a few of the 103 sub-sectors ended May in black ink, in terms of output growth.

Our high frequency proxies for capital goods absorption and aggregate investment spending also point to a major hit from this non-economic event, with double-digit drops.

In the next few months, developments on the realm of economic confidence and spending intentions by both firms and individuals will bring clues about the potential longer-lasting activity impact from the truckers’ strike (and the bigger picture of political uncertainties).

For now, what we can say is that the numbers from the industry (and probably other sectors) suggest downside risks to our (ex-ante) Q2 GDP growth projection of 0.2% q/q. That means our full-2018 GDP growth estimate (+1.6%) also has risks skewed to the downside."