August Industrial Production In The Euro-Area

The financial turmoil in the Euro Area is taking its toll on the real economy. Earlier this month it was reported that German Industrial Production declined 1.0% in August from July. Since then a number of other countries from the Euro Area have released data on August Industrial Production that have generally been positive. The exception has been Greece, which not unexpectedly continued to decline and was 3.2% below July. Some of the other troubled countries of the Area, namely, Spain, Portugal and Italy reported significant gains in August. Spain was up 3.4%, Italy, 4.3% and Portugal 8.2%. France managed a 0.5% increase and Finland a 2.1% rise.

The industrial production index representing a significant portion of country's economic activity on a monthly basis is often used as a predictor of the quarterly measure of real Gross Domestic Product. As a predictor it does have its limitations. It is not the most timely statistic. Here it is mid October and the latest data are for August. Moreover, even though the data are seasonally adjusted, there is considerable variation in the month to month changes as can be seen in the attached charts. Nevertheless, over time the data show a trend that can color one's prediction.

In the case of the first chart, industrial production in Italy appears to show a mildly rising trend, while the data for Portugal and Spain appear to be trendless and that for Greece in a definite down trend. In spite of the August increases in the industrial production indexes for Italy, Portugal and Spain, these increases are unlikely to result in a rise in real GDP. The decline in Greece's industrial production in August reflects the continued disruptions in the real economy of the financial crisis and is most unlikely to change much in the coming months.

The trends in the second chart are in sharp contrast to those in the first chart. Industrial production in France, Germany and Finland, all show definite rising trends, suggesting that the impact of the financial crisis may be muted on the economies of these countries.

Industrial Production M/M % Changes in SA Indexes Aug
11 Jul
11 Jun
11 May
11 Apr
11 Mar
11 Feb
11 Jan
11 Germany -1.04 3.87 -0.89 0.99 0.09 1.00 1.29 0.18 Greece -3.23 9.97 -456 1.59 -539 -1.60 -1.10 -1.56 Portugal 8.23 -2.89 -3.12 3.22 -384 0.75 2.31 -3.981 Spain 3.35 -0.98 -3.23 2.68 -3.41 0.12 -1.16 3.62 Italy 4.26 -0.33 -0.55 -0.44 1.00 0.67 1.60 1.68 France 0.52 1.82 -1.47 2.04 -0.75 -0.85 0.32 0.86 Finland 2.09 -0.40 -3.72 2.0 2.09 -0.30 1.81 -4.15