European Industrial Production Drops Most Since 2002
European industrial production declined the most in almost seven years in September, capping a third quarter that probably saw the economy enter a recession.
Output in the 15 nations that use the euro fell 2.4 percent from a year earlier, the biggest year-on-year decline since February 2002, the European Union's statistics office in Luxembourg said today. From the previous month, production fell 1.6 percent, led by Germany, the region's biggest economy.
Companies including cement producer Holcim Ltd. and carmaker Bayerische Motoren Werke AG are shutting plants or cutting output as orders weaken in the wake of the global financial crisis. Manufacturing has shrunk for the last five months, data released last week showed, and the European Commission estimates that the euro-area economy contracted in the previous and current quarters.
“There is little prospect of an improvement in industrial production on the horizon,'' said Martin van Vliet, an economist at ING Group in Amsterdam. “Further aggressive policy stimulus seems essential before we can start to think about an eventual recovery in industrial and indeed overall economic activity.''
As the economic outlook deteriorates, the European Central Bank has already cut its benchmark interest rate by one percentage point to 3.25 percent in less than a month short-term cash loans. ECB President Jean-Claude Trichet said on Nov. 6 that another cut was possible.
`Respond Forcefully'
ECB policy makers “have made it clear that they are willing to respond forcefully to the deterioration in demand conditions,'' said Nick Kounis, chief European economist at Fortis in Amsterdam. He expects the ECB to cut its key rate to 2 percent next year, revising a previous forecast of 2.5 percent.
The euro erased its gains after the production report and was little changed at $1.2521 as of 10:14 a.m. in London. It had earlier risen as much as 0.9 percent to $1.2632.
The year-on-year drop in September industrial production was double the 1.2 percent decline forecast by economists, based on the median of 21 estimates in a Bloomberg News survey. They had forecast a 1.8 percent drop on the month.
Output in Germany, Europe's largest economy, fell 3.7 percent in September from the previous month and was down 2.2 percent from a year earlier, today's report showed. Production, measured from both the previous month and from a year earlier, also declined in France, Spain and Italy.
Filed under: management by Wolf