Euro area industrial production (IP) dipped 0.3% m/m in March, in line with our below consensus expectations. This is consistent with an annual growth rate of 1.8% y/y, down from 1.9% y/y. February data was revised down 0.1pp to 1.0% m/m, while January was revised up to -0.1% m/m (+0.2pp). Germany, France and The Netherlands drove this month’s decline, while Italian and to a greater extent Spanish and Irish IP improved further.
Overall euro area IP rose by 0.9% q/q in Q1, the strongest growth in four years. This echoes the positive developments recorded by business surveys in the first months of 2015. Euro area manufacturing PMIs and the EC industrial confidence indicator hit eleven-month peaks in March and posted the highest quarterly average in Q1 since mid-2014. Nonetheless, manufacturing confidence eased slightly in April and we expect industrial activity to moderate somewhat in Q2 after the solid Q1 growth (carryover into Q2 is at 0.1% q/q). In particular, we are looking for some slowdown in two of the largest euro area economies. In Germany, weakness in core factory orders, reflecting decelerating growth in US and some parts of Asia, suggests that IP could shrink in the coming months. In France, a technical slowdown after the jump in Q1 could happen, led by energy.
Details revealed that energy led the drop in March (-1.7% m/m), followed by capital and durable goods (both at -0.9% m/m). Over the quarter, however, energy production was strong at 1.9% q/q, as was non-durable consumer goods (+1.2% q/q). Meanwhile, manufacturing production rose 0.7% q/q, and capital goods’ production was modest at 0.4% q/q (Figure 5). In terms of sectors, machinery production was the only one to shrink in Q1 (-1.2 q/q), while motor vehicles production strengthened further to 4.7% q/q, and metals and computers production remained solid (Figure 6).