According to Bert Colijn, senior economist at ING, 0.5% decline in Eurozone’s industrial production are adding to concerns about a prolonged industrial slump, which will put more pressure on the ECB to act.
“If you thought the ECB overreacted last week with hints towards restarting QE and a rate cut, April’s production numbers should make you think again. While volatile and not in itself a justification for more expansionary monetary policy, these numbers are a confirmation of a continued slowdown in the manufacturing sector which poses a threat to GDP growth if it continues for long enough. As the trade war only flared up again in May, Eurozone industry seems set for disappointing production in Q2.”
“The weakness in production is therefore mainly related to production for external demand as the sectors that produce mainly for foreign final demand are the ones that have contributed most to the decline in production. Domestic demand has limited the damage so far.”
“These numbers will be seen as confirmation of sluggishness and increase curiosity about whether the ECB will indeed act on the weaker industrial growth environment.”
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