French, Italian output drops, raising fears of eurozone slowdown

10th February 2016, Comments 0 comments

France and Italy reported falls in December industrial production on Wednesday, a day after Germany did the same, raising fears that eurozone economic growth is slowing even more than feared.

Germany, where output fell 1.2 percent in December, is the bloc's largest economy, followed by France, which reported a production decline of 1.6 percent, and Italy, where output dropped by 0.7 percent.

Non-eurozone member Britain meanwhile also posted a drop of 1.1 percent.

"December's weak industrial production data from France and Italy showed that the sector is still struggling and add to the risk that eurozone GDP (gross domestic product) growth slowed in Q4 (fourth quarter)," Jack Allen, of Capital Economics, said.

Capital Economics has now revised down to 0.2 percent its forecast for fourth-quarter 2015 eurozone GDP growth forecast following the data.

The eurozone economy grew by 0.3 percent in the third quarter after 0.4 growth in the second.

France's industrial output had already slipped, by 0.9 percent, in November, the national statistics agency INSEE said.

The figure took analysts by surprise.

Allen said his team had pencilled in a slight rise in French industrial production for December but the result turned out to mark the biggest monthly drop in 19 months.

"French production was much weaker than expected," he wrote in a note to investors.

"What's more, the decline was broad-based across industrial sectors," he added.

In December it was weighed down by the transport equipment, agriculture and food industry sectors. Manufacturing output also fell by 0.8 percent, after increasing by 0.6 percent in November, INSEE said in a statement.

Unusually mild weather hit electricity and gas production, while output in the auto sector decreased 3.7 percent, it added.

Analysts at the Citi European Economics team said French industrial production would eventually get back on track, "but the pace of the recovery is likely to be constrained by the low entry point for 2016 and the greater uncertainty related to developments in the global economy".

The gloomy picture were compounded by data showing a similar trend in the eurozone's third-biggest economy, Italy.

Italian industrial production also disappointed in December, with a month-on-month 0.7-percent contraction, its national statistics institute, Istat reported.

Figures released Tuesday cast a shadow over the outlook for Germany, showing a surprise drop in industrial production in December, as well as a decline in exports.

According to data compiled by the economy ministry, German industrial output fell by 1.2 percent in December, disappointing analysts' expectations for a modest increase.

Factory output -- a key yardstick for gauging the health of Europe's biggest economy -- had already declined by 0.1 percent in November.

On the periphery of the eurozone, Finland on Wednesday said its industrial output dropped for the fourth straight year in 2015, plunging the sector into its worst crisis in history.

© 2016 AFP

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