Strong Eurozone industrial production adds to optimism - ING

Bert Colijn, Senior Economist at ING, notes that the Eurozone’s industrial production increased by 1.5% MoM in November and while this indicator is volatile, this release does mean that Eurozone industry has almost certainly accelerated and boosted GDP growth in Q4.

Key Quotes

“A jump in industrial production was bound to happen. New orders for manufacturing have been surging in the second half of 2016, capacity utilization has increased and producers have indicated in surveys that production has been much stronger than expected in the last months of the year. The annual growth rate of 3.2% YoY is the strongest since 2011. Industrial production is a volatile indicator though and December probably saw a small correction to this strong November reading, but it seems likely that Eurozone industry growth accelerated significantly in Q4. A 1% MoM decline in production in December would still give quarterly growth of 0.9% QoQ, much better than the 0.5% QoQ of the third quarter.”

“Eurozone industry has ended 2016 on a high note and that optimism likely carries over into the new year. The question remains whether political uncertainty will not further hinder investment as the Eurozone political agenda is packed in the months ahead. Uncertainty about larger trading partners also plays a role here as most of the acceleration in new orders for manufacturing has come from outside the Eurozone. But without geopolitical risks flaring up in the coming months, it seems that the recovery of Eurozone industry can continue in the first quarter as most leading indicators are pointing towards continued recovery.”