Industrial Weakness Likely To Maintain Disinflationary Impulse

Eurozone industrial production contracted on a monthly basis in November for the 5th month in the past 6, at -0.3% M/M (-0.7% prior), matching consensus expectations - though the -6.8% Y/Y working day adjusted reading was weaker than had been anticipated (-6.0% survey, -6.6% prior).

• The monthly decline was driven by Italy's -1.5% M/M outturn, the biggest drop for Italian production since April 2023. Germany (-0.3%) and the Netherlands (-1.0%) also saw drops on the month, with France (+0.5%) and Spain (+1.1%) seeing expansion after drops in October. (Unusually given recent outsized volatility, Ireland IP had very limited impact on the Eurozone-wide figure in November.)
• From a sectoral perspective, energy output accelerated for a 2nd consecutive month (+0.9% M/M vs +0.6% prior), with non-durable consumer goods production remaining positive at +1.2% (+1.2% prior). Otherwise, there was broad weakness: intermediate goods production was down -0.6% M/M (-0.7% prior), capital goods -0.8% (-1.1% prior), with durable consumer goods production seeing the largest monthly drop since April 2023 (-2.0%, vs +0.1% prior).
• With the drop on the month, Eurozone industrial production levels have set a fresh post-Oct 2020 low, and are down 8% from the September 2022 peak.
• Forward-looking indicators show little impending improvement in activity, including the European Commission's industry confidence measure (which in December posted a 5th consecutive month at a stable but recessionary level) indicated a continued decline in order books.
• With weakness in activity and demand, and EC industrial sector selling price expectations remaining below the longer-term average, the goods sector is likely to continue exerting disinflationary impulses on the eurozone economy, in potential contrast to services where price expectations continue to tick higher.

Source: Eurostat, MNI Calculations