Industrial Output Down In January

Industrial production fell by 0.4% m/m in January, after rising by 0.9% m/m in December. Survey data signals that an improvement is most likely going forward. The pace of activity contraction should ease over the quarter with respect to the end of last year.

Industrial output fell in January, according the Eurostat figures released this morning. The seasonal adjusted index decreased by 0.4% over the month, after rising by 0.9% in December. Production increase in the consumer and intermediate goods sectors was not able to offset falls in the energy and capital goods sectors.

Production fell significantly in France, and by a smaller amount in Germany while it rose in Spain. The sharp contraction of French output however, might be short lived. The introduction of some changes in product taxation from January 2013 boosted activity in December, depressing consequential output in January. A technical rebound might not be excluded in February. Adverse weather conditions might be behind the fall of German output, which could be reverted in February.

On a three-month rate of change basis, a better gauge of its underlying trend, production was down by 1.5%. This is half a point higher than recorded in the three-months ending in December. This suggests that the rate of contraction in easing in the industrial sector. Survey data support this view. The new orders-to-inventories ratio, a good track of industrial production output, is clearly trending upwards.

To sum up, industrial production figures are highly volatile. A fall of 0.4% on a monthly basis is not encouraging. Nevertheless, its underlying trend shows some signs of improvement. It is worth stressing, that available hard and soft data indicate that eurozone activity is still contracting, although at a slower pace. After falling by 0.6% q/q in Q4 2012, GDP might contract marginally in Q1 2013.

BY Clemente DE LUCIA

To Read the Entire Report Please Click on the pdf File Below.