A Sampling of Industrial Production Reports Suggests Economic Growth in Continental Europe Still on the Low Side

The role of industrial production in most highly developed economies has declined in importance as the role of services has loomed larger. Nevertheless, industrial production still represents a significant portion of these economies and its monthly measurement can be a useful early indicator of total economic activity.

Several Continental European countries have reported Industrial Production indexes for January over the past week. The picture is mixed. The year-to-year percentage increases range from a minimal increase of 0.10% for France to a 15.27% increase for the Czech Republic. More important than one month changes, however, are the underlying trends.

Industrial production in France, Italy, Belgium, Spain and Greece has shown little evidence of a trend either up or down over the past five years. The indexes for these countries in recent months are little different from the base of 100 established in 2000. As an example of these trends, industrial production indexes for Belgium and Italy are shown in the first chart.

In sharp contrast to the experience of these countries, the trends in industrial production in Ireland and the Czech Republic have been significantly upwards as shown in the second chart. More important than these, relatively small economies, is the improvement in industrial production in Germany where production is now some 11% higher than the low point of 97.7 (2000=100) reached in September, 2003. Germany is the only major continental country where Industrial production has shown even a modest upward trend. The third chart contrasts German Industrial Production with that of France.