25 April, 2014 09:07 IST
Eurozone industry sees steepest slump for over four years
Source: IRIS International (15-NOV-12)
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Eurozone industrial production fell 2.5% in September, considerably larger than analysts' estimates of a 1.9% decline and the largest fall since January 2009.

The data add to evidence that the eurozone economy is heading back into recession as deteriorating economic conditions spread from deficit-fighting countries to previously robust-growing countries such as Germany.

Output fell 3.2% in France,  2.5% in Spain, 2.3% in Germany and 1.5% in Italy.  A series of surprisingly strong increases in output earlier in the summer, linked mainly to what looks like a temporary hike in car production in several countries, is therefore giving way to a steep downturn in factory activity across the region, as has been indicated for some time by business surveys such as Markit's PMI series and European Commission-sponsored surveys such as those conducted by IFO and INSEE in Germany and France respectively. 

The downturn persisted with strong momentum in October, according to the PMIs, with output dropping in all major euro member states, including Germany. The steep fall in production will probably do little to change the views among policymakers at the ECB that a further easing of policy is warranted.

The ECB watches the survey data closely, and the weakness of the surveys has been a key factor behind the ECB already taking policy to what President Mario Draghi considers an appropriately accommodative stance. Draghi has already recognised that the economy is weak and will remain so for some time. The ECB is therefore likely to continue to put the onus firmly on the shoulders of national governments to implement reforms and take advantage of the OMT facility the ECB has offered, rather than feel pressured into undertaking more stimulus measures.

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