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Eurozone Industrial Production Takes The Shine Off The Bloc's Recovery

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The eurozone lost some of its momentum after data on Thursday showed that factory output had fallen to its lowest level since April 2010. The common currency traded at $1.3285 at 7:30 GMT on Friday morning.

The European Union's statistics agency, Eurostat, shocked analysts by reporting a 1.5 percent drop in industrial production across the eurozone from June to July. The sharp drop surprised analysts who saw strong manufacturing survey data as an indication of increasing industrial production.

Even more worrying was data from the bloc's largest economies, Germany and France, which also showed a decline. Business confidence indexes in the two nations have been particularly strong recently, so retreating industrial production was unexpected. With the region's two largest economies faltering, many are questioning whether or not the eurozone will be able to sustain its fragile recovery.

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The Wall Street Journalreported that German industrial production fell by 2.3 percent in July. The decline erased much of the optimism surrounding the country's better than expected figures from the previous month. Some investors think the lackluster data is the result of major investments being postponed until Germany's September 22nd elections have concluded.

Italian industrial production also disappointed and, as the bloc's third largest economy, contributed to the eurozone's overall poor figures. Many are attributing Italy's dip to lower sales and production at Fiat.

Thursday's data reminded investors that the eurozone isn't out of the woods just yet. Although the European Central Bank announced a higher, revised forecast for the bloc at its last policy meeting, the bank still sees the economy contracting 0.4 percent this year before returning to growth in 2014.

Posted-In: European Central BankNews Eurozone Commodities Forex Global Federal Reserve Markets Best of Benzinga

 

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