In an unexpected turn of events, industrial production in the Eurozone for July experienced a more pronounced decline than anticipated. Simultaneously, the European Commission (EC) has revised down its economic growth projections for both the European Union (EU) and the Eurozone for the current year.
According to data released by the European Union Statistics Office (Eurostat), industrial production within the Eurozone contracted by 1.1% on a month-on-month basis and registered a year-on-year decrease of 2.2% in July.
These figures exceeded the projections, which had anticipated a milder 0.7% month-on-month decline and a 0.3% year-on-year drop. The sharper-than-expected decline was primarily attributed to a significant month-on-month reduction in the production of capital goods and durable consumer goods. Additionally, it was accompanied by a year-on-year decrease in energy and intermediate goods production.
On Monday (September 11), the European Commission underscored that persistent high inflation continued to exert downward pressure on consumer demand. Furthermore, it noted that the eurozone’s exports were adversely impacted by feeble external demand, with China being a notable source of reduced demand.
Subsequently, the European Commission, in its recent forecast on September 12, has revised its growth outlook for both the EU and the Eurozone. For the EU, the revised projection indicates a growth rate of 0.8% for the current year, down from the previous forecast of 1.0%. The forecast for the subsequent year stands at a growth rate of 1.4%, compared to the prior estimate of 1.7%.
Similarly, the EC’s revised projections for the Eurozone suggest a growth rate of 0.8% for the present year, marking a reduction from the previous forecast of 1.1%. Looking ahead to the following year, the Eurozone is expected to expand by 1.3%, down from the prior forecast of 1.6%.
These developments underscore the challenges facing the Eurozone’s industrial sector and its broader economic prospects in the face of a variety of domestic and international factors, including inflationary pressures and shifting global demand dynamics.