EMU Area IP Runs Flat and Trends Lower

Industrial production in the European Monetary Union (EMU) was flat in October with manufacturing output up by only 0.1% month-to-month. Consumer goods output fell by 2.2% month-to-month with declines in durable goods and nondurable goods production immediate goods output was flat in October with capital goods output rising by 1.7% All in all, it was a weak month for most of the sectors and even though capital goods output revived it did so after a sharp decline in September

Sequential growth Sequential growth rates show total output in the monetary union falling 1.3% over 12-months, falling at a more elevated 3.4% annual rate over six-months and then trimming the pace of decline to -0.8% at an annual rate over three-months. Manufacturing trends with some small differences follow that same pattern.

Sector performance The sectors for industrial output show consumer goods output fairly steady, rising at about a 2.5% pace over 6-months and 12-months but then declining at a 2.6% annual rate over three-months. Consumer durable goods output declines over six-months and 12-months but shows improvement while declining and then posts an increase at a 3.8% annual rate over three-months. Consumer nondurable goods take the opposite pattern, rising at a 3.5% annual rate over 12-months and over six-months and then falling at a 3% annual rate over three-months. Intermediate goods output, on the other hand, posts negative numbers on all horizons: -3.7% over 12-months, -6.3% over 6-months and 5.3% over 3-months. The Output of capital goods also fails to show a clear trend with output falling by 2.2% over 12-months, weakening further at a -4.2% annual rate over six-months, then advancing at a 3.2% annual rate over three-months. There was little guidance in this about where industrial production is trending. The headline for manufacturing simply shows negative growth rates on all horizons without clear tendencies and the sectors are mixed.

Country performance In October among thirteen of the oldest monetary union members and early reporters of industrial production, seven of them showed manufacturing output declines, this compares to eight of them showing declines in September, and seven showing declines in August. A little over half of the core of reporters in this table are showing declines on a month-to-month basis regularly.

Countries sequentially Sequential growth rates for the monetary union, as we saw above, show negative growth rates without clear trends. The 13-EMU member countries in this table show six-with output declining over three-months, nine with output declining over six-months and eight with output declining over 12-months. The number with output declining diminishes over three months but not by a lot although the median change in output among these 13-members transitions from negative readings over six-months and 12-months to post a positive reading of 0.4% over 3-months.

Quarter-to-date On a quarter-to-date basis seven of the 13 member countries in this table should log output declines the median output change among the 13 members was -0.3%, this compares to industrial production overall having a -0.7% decline, and with manufacturing output being flat in the quarter-to-date. Quarter-to-date readings at this point are not that meaningful in and of themselves because October is the first month of the new quarter and so the growth rate is giving us the growth in October from the middle of the previous quarter it simply tells us that we're off to a flat to negative start in the new quarter but the final quarterly growth rate could still be quite different.

Abject weakness since Covid The final column of the table compares where output is today compared to where it was January 2020. By looking at this column we can see how weak this period has been for the monetary union overall. Output is lower since January of 2020, a period that is now more than 4 1/2 years long; manufacturing output is lower as well. The output of consumer durable goods is lower, the output of intermediate and capital goods is lower, however, the output of consumer nondurable goods over this period is up by 9.8%. Seven of the monetary union members in the table show manufacturing output declines on balance since January of 2020, these are: Portugal, Malta, Luxembourg, Italy, France, Germany, and Austria. This list contains 3 of the 4 largest EMU economies. Among these, Germany has the biggest shortfall in output compared to January 2020 with output lower by 12.1%. Portugal has output lower by 7 percentage points, Luxembourg, an extremely small country, has output lower by 9.1%. The countries that have done well over this period are Ireland where output is up by 51% compared to January of 2020, Greece where output is up by 14.8%, The Netherlands where growth is up by 4.8%, and Belgium where growth is up by 5.5%. Even so few of these statistics are that impressive when you realize that these are raw period-to-period percentage gains over a 5-year period.

On Balance: The upshot is that output in the European Monetary Union continues to be listless and it isn't showing any sign of breaking out of the torpor that has encompassed it and its various member countries. There are strong three-month gains in output being recorded by Malta, Portugal, Spain, Ireland and by Luxembourg. There are output increases over three-months and six-months in a row by Spain, Malta, and Ireland. Output increases over three-months, six-months, and twelve-months occur in Spain, Malta, and Ireland. These results contrast with declines for three-months in a row in Austria, Belgium, Italy, The Netherlands, and Greece. Countries in the monetary union are continuing to suffer cross currents, and EMU continues to be a difficult place for the European Central Bank to make a single monetary policy that suits all.