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Euro-area industrial production declined for a second month in April, led by a drop in Germany, adding to signs of a deepening economic slump (EUGNEMUQ).
Output in the 17-nation euro area slipped 0.8 percent from March, when it decreased a revised 0.1 percent, the European Union’s statistics office in Luxembourg said today. Economists had projected a drop of 1.2 percent, the median of 28 estimates in a Bloomberg News survey showed. From a year earlier, production fell 2.3 percent.
European manufacturers are cutting spending and jobs as global growth weakens. China led a slowdown in manufacturing across Asia last month and European economic confidence slumped to the lowest in 2 1/2 years. European Central Bank President Mario Draghi said on June 6 that risks to the economic outlook had increased and “a few” Governing Council members had called for an interest rate cut.
“The latest data clearly show (EUGNEMUQ) that the euro-land economy is in free fall,” Jan Amrit Poser, chief economist at Bank Sarasin in Zurich, said in an e-mailed note before today’s report. “If measures to counter this development are not put in hand soon, the euro land will slip into a deep recession (EUGNEMUQ).”
The euro extended gains after the data were released, trading at $1.2527 at 11:17 a.m. in Brussels, up 0.2 percent.
The statistics office had previously reported a monthly decline of 0.3 percent in March. In the 27-nation EU, output fell 0.4 percent in the month and 1.7 percent in the year.
The single currency has shed 4.9 percent against the dollar over the past three months, reaching a two-year low, after an inconclusive election in Greece raised the specter of a euro breakup as Spain grappled with a deepening banking crisis.
The euro-region economy will probably shrink 0.1 percent this year before expanding 1 percent in 2013, the ECB said in its latest projections on June 6. The bank left its benchmark interest rate at 1 percent, matching a record low. It had previously forecast the economy to expand 1.1 percent next year.
While Germany’s economy helped to bolster the region’s gross domestic product in the first quarter, indicators have since weakened. Euro-region services and manufacturing output contracted at the fastest pace in almost three years in May and German business sentiment dropped more than economists had forecast. The euro-area unemployment rate held at 11 percent in April.
German industrial output fell 2 percent in April from the previous month, when it rose 0.9 percent, today’s report showed. Italy and Spain reported monthly declines of 1.9 percent and 0.7 percent, respectively. Portugal had a slump of 6.5 percent. Ireland, France and Greece had a gain in the month.
Siemens AG (SIE), Germany’s largest engineering company, said on May 24 that it plans to eliminate 490 jobs at factories making transformers in Germany in response to falling prices. Bayerische Motoren Werke AG, the world’s biggest maker of luxury vehicles, said last month Germany’s car market won’t grow this year as the region’s crisis erodes demand.
In China, the Purchasing Managers’ Index fell to 50.4 in May from 53.3 in the previous month, the statistics bureau and logistics federation said on June 1. Gauges for India, South Korea and Taiwan also fell. Business activity in the U.S. expanded in May at the weakest paced in more than two years as orders and production cooled.
Output of capital goods (EUGNEMUQ) in the euro region dropped 2.6 percent in April from the previous month, when it rose 1.2 percent, today’s report showed. Production of durable consumer goods slipped 0.9 percent, while output of intermediate goods decreased 1.2 percent. Energy production advanced 6.9 percent after sliding 8.1 percent in March.
The EU’s statistics office is scheduled to report euro- region exports for April on June 15.
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