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  HOME | Business & Economy (Click here for more)

Eurozone Factory Output Declines at Fastest Annual Pace in 9 Years

MADRID – Factory output in the eurozone fell at the fastest annual pace in nine years as 2018 drew to a close, with the sector entering a technical recession as overseas demand for equipment and tools weakens.

The eurozone’s factories had a boom year in 2017, driving the currency area to its strongest year of economic growth in a decade. But last year saw unexpected cooling, particularly among companies that make the equipment used by factories around the world.

With China and other parts of the global economy slowing, overseas demand for the eurozone’s manufactured goods is unlikely to rebound quickly, leaving the currency area more dependent on household and government spending for its growth this year.

The European Union’s statistics agency Wednesday said industrial production across the 19 countries that use the euro was 0.9 percent lower in December than in November, and 4.2 percent down on the final month of 2017. The year-to-year drop was the largest since November 2009, when the eurozone was still mired in the global recession that accompanied the financial crisis.

Industrial output declined for a second straight quarter in the three months through December, placing the sector in a technical recession as it grappled with a series of headwinds.

“The eurozone industrial sector is plagued with... drama,” said Bert Colijn, an economist at ING Bank. “Trade wars, emission standard related production delays, yellow-vest protests and slowdowns in emerging markets have all played a part in the weakening of production over recent months.”

Eurostat’s figures showed that production of capital goods bore the brunt of those headwinds, and was down 5.5 percent on a year earlier.

Over recent decades Germany, the currency area’s industrial powerhouse, found strong demand from China and other developing economies that were boosting their own industrial capacity. But that success may have left Germany and the wider eurozone vulnerable to a fall in global business confidence last year amid uncertainty over the obstacles that lay ahead for international trade.

Figures to be released Thursday are expected to confirm that the eurozone economy continued to grow in the final three months of last year, albeit at a weak pace.

Economists do not anticipate a pickup soon, and point to a series of potential setbacks that could push the currency area to the brink of recession, including the possibility that the United Kingdom will leave the EU next month without a new trade deal.

 

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