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Economy in Brief

EMU Area IP Jumps
by Robert Brusca  October 12, 2017

Euro area industrial production is jumping in August as its 1.4% gain is the largest one-month spurt since November last year when it gained 1.6% in one month.

Manufacturing growth is up by 1.7% in August and up at a 5.9% annual rate over three months. This is down from a 7.5% annual rate gain over six months but above the 12-month pace of 4.1%. Intermediate goods and capital goods are the leading sectors. Capital goods output is expanding at an 8.7% annual rate over three months, nearly even with its six-month pace of 8.8% and nearly to double its year-on-year pace of 4.6%. Intermediate goods are up at a 7.7% pace over three months, above their 7.0% pace over six months and on an accelerating run compared to the sector's 5.0% gain over 12 months. Consumer goods output is up at a relatively weak 1.1% over three months, down from its 7.1% pace over six months and below its 12-month pace of 2.0%. Both durable and nondurable goods output have slowed; nondurable goods output is up at a growth rate of less than 1% over three months.

This is not a recovery rising on the back of the consumer. Capital good and intermediate goods output are leading the parade with consumer goods output trailing.

In the quarter-to-date, output appears a bit more balanced. Two months into Q3, capital goods output is up at a 9.6% annual rate. Intermediate goods output is up at a 7.2% annual rate and consumer goods output is up at a weaker but still quite strong 3.9% annual rate.

Looking the breadth of output in the euro area, we find that manufacturing output in August is rising in 9 of 11 of the original EMU members. The U.K. shows a gain in output as well while Sweden and Norway both show output drops in August. July has seen only 3 drops among EMU members after June had showed a region-wide collapse with gains in only two members: Italy and Luxembourg.

But output is back on an expanding path with gains being exhibited in all sectors. The incoming data on industrial output is beginning to support the strong readings having been offered by the PMI reports.

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