EMU IP Falls and Stays on a Sequentially Declining Path

Output in the European Monetary Union (EMU) falls by 2% month-to-month for the headline series that excludes construction. This follows an increase of 1.5% in August and decline of 0.3% in July.

Sequentially, output excluding construction follows 2.4% over 12 months it follows at a 3.8% annual rate over six months and falls at a 3.7% annual rate over three months showing a tendency toward accelerating weakness.

Manufacturing output follows suit, falling by 3.1% over 12-months falling at a 6.2% annual rate over six-months and following at a 6.8% annual rate over three-months.

The sectors for industrial production show vastly different results and trends. For consumer goods output is up by 3.6% / 12 months it accelerates to growth and 11.8% annual rate over six months and holds a strong 10.8% annual rate of expansion over three months. This tendency toward acceleration contrasts sharply with intermediate goods output output falls by 2.7% / 12 months accelerates the drop to a 4.9% annual rate of decline over six months and then falls at an even faster 7.2% annual rate over three months. Capital goods output shows relatively steady declines over all the time horizons output of capital goods falls by 5.2% / 12 months at a 5.6% annual rate over six months and then it falls at a 4.3% annual rate over three months.

The strength that we see in industrial production is lodged in the consumer goods sector and concentrated and non durables where the growth rates show clear acceleration meanwhile the output of durable goods under consumer goods shows waffling and mostly negative output trends.

Across the monetary union in September We followed 13 early reporting members and among those 6 show declines in output what's 7 showing increases in output. Among the largest countries in the monetary union Germany and France show output declines well Italy and Spain show output increases. In August six countries showed output declines and in July seven showed output declines. The performance of output in the last three months has been decidedly mixed.

Looking at output sequentially over 12 months output declines in eight of these 13 reporters over 12 months I'll put the kleines in nine of them over six months well I'll put the clines for eight of them over three months. Quite apart from looking at the weighting involved which is involved in looking at the headlines for the monetary union that we previously reported the breadth of declines across these countries shows the weakness is widespread. However, putting aside the issue of whether output is rising or declining, the separate question is whether output is accelerating or decelerating. Over 12-months output accelerates in 75% of these reporters compared to a year ago. Over six-months output accelerates across 41% of reporters compared to their 12-month growth rates. Over three-months output accelerates across 54% of the reporters compared to six-month growth rates. The 12-month result shows impressive breadth, however, the growth rate over 12 months is still negative and so it's simply the European Monetary Union stuck in a shallower hole than it was 12-months ago.

In the quarter-to-date there are output declines at 8 of the reporting countries and, since these are September data, they are complete for the third quarter.

Separately, we logged data for Sweden and Norway: these two Northern European economies show different experiences with one showing an output the climb and the other one an output increase over each of the last three months. Sequentially, both of them have mixed trends. However, both of them show increases in output in the third quarter, with output in Sweden rising at a 2.7% annual rate, and output in Norway rising at an 11.7% annual rate.

On balance the industrial output data for Europe remains weak with most trends being weak and with the experience across countries showing a great deal of weakness that continues to be scattered across the various countries. This point is most easily made by noting that among the early reporting monetary union countries in the table not one of them shows output increases over three months six months and 12-months, however, five countries Germany, Ireland, Luxembourg, the Netherlands, and Italy show declines on each of those horizons.

Growth in the monetary union continues to be touch-and-go with a leaning toward stop. Monetary policy has been and appears still to be on a declining path in EMU even though inflation has not remained disciplined.