A Small Correction In Industrial Output In May

Industrial production declined by 0.3%m/m in May, a small correction after three consecutive months of increase. We see upside risks to our forecast of a 0.1% decline of Eurozone GDP in Q2. Survey data suggest that output might continue to increase, although moderately, over the coming months.

Industrial production declined by 0.3% m/m in May. This correction followed 3 consecutive monthly increases, from February to April. Output is however still well below the level recorded last year. After improving from -3.9% in January to -0.6% in April, the year-on-year growth rate of output fell down to -1.3% in May.

As for the rise recorded in April, the May decline was mainly driven evolutions in France and Germany (see EcoFlash “Germany: Industrial output down in May” and “France: No big fall in May Production”), where industrial production had risen sharply in April. Among large Eurozone countries, the pattern was reversed in Spain, Italy and the Netherlands, were output fell in April, and rebounded in May.

Survey data have shown some incipient signs of improvement during the second quarter of 2013, which are consistent with the fact that, after three consecutive months of increase, the correction recorded in May industrial output was very limited. Assuming zero growth in June, industrial output would grow by 0.9% q/q in Q2, while in Q1 it was almost flat and GDP fell by 0.2% q/q.

This data inserts upside risks to our current forecast for a limited decrease in Eurozone GDP in the second quarter of 2013 (-0.1% q/q). Yet, many factors are still weighing on domestic demand for goods and services such as tough labour market conditions and tightening credit conditions, mainly in peripheral countries. Last but not least floods in northern Europe in May might have a non-negligible impact on Q2 output results.

BY Frédérique CERISIER

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