Industrial production in the Eurozone fell by 1.3% in June, exceeding expectations. The decline was driven by a 2.3% drop in German production and weakness in consumer goods. Eurostat also revised its May data from 1.7% to 1.1%, indicating a weaker-than-expected trend.
However, GDP grew by 0.1% quarter-on-quarter in the second quarter, and employment increased by the same rate.
However, these figures fall short of the 0.2% increase in the previous quarter.Recent positive PMI data and consumer confidence indicators supported the view that the Eurozone is resilient to trade wars. However, recent industrial orders and a weak confidence index from Germany cast a shadow on this picture.
Investors believe that the EU-US trade agreement and Germany’s plans to increase budget spending will support growth.
Therefore, the expectation that the ECB may halt interest rate cuts has strengthened. Nevertheless, due to structural problems, the Eurozone is expected to exhibit modest growth of around 1% annually in the coming years. (The last line is a separate paragraph and not directly related to the preceding paragraph.)
