How much effort for Europe. The European industrial production in December has taken more than expected: -1.1% on the month, -2% on an annual basis. A signal for Frankfurt, for future moves.
The weakness of industrial production (especially for intermediate and instrumental assets) means a reduction in investments and long -term production by companies and a slowdown in the overall demand. A more expansive monetary policy, with consequent reduced financing costs for businesses, could encourage recovery. But the ECB, as always, is in the balance between having to avoid an excessive economic slowdown and avoid a rise in inflation.
According to Eurostat data in the euro area, industrial production fell by 1.1% in December compared to the previous month and 2% compared to the same month of 2023. In the European Union the contraction was 0.8% monthly and 1.7% per year. In the entire 2024 industrial production has fallen by 1.7% per year in the euro area and 2% in the EU.
Many are suffering. Italy and Germany first of all. On a monthly basis, in December the Italian industrial production fell by 3.1%, while in Germany by 2.9%. Worse Belgium (-6.8%) and Portugal (-4.4%). On the contrary, Spain showed a growth of 1.4% and France contained flexion to -0.4%. On an annual basis, Italy has undergone the second worst contraction of the Eurozone (-7.1%), exceeded only by Austria (-9.5%). For Germany -4%. In contrast, however, three countries: Malta (+14.4%), Ireland (+10.1%) and Lithuania (+7.6%).
The most affected sectors are those of the intermediate and instrumental assets. In December in the euro area the former decreased by 1.9% and almost three percentage points the latter. Durable consumer goods are also downhill, while the energy sector increases by half a point. Similar EU trends. If you look per year, the contraction is heavy above all for capital goods, dropped by 8.1% in the Eurozone and 7.5% in the EU. The decline in intermediate and instrumental assets means for companies less investments and long -term production, therefore more firm economy. On the contrary, there has been growth for consumer goods not durable: +8.3% in the euro area and +8.2% in the EU.
The data are a signal for the European Central Bank. At least three other reductions in interest rates in 2025 are expected. But the slowdown of industry, together with an inflation that according to the ECB predictions will return to the target of 2%, will influence Frankfurt’s moves.
