fundamental alert

Euro-Zone Industrial Production Hits 15-Year Low as Demands Falter

Friday, 12 December 2008 09:49:20 GMT  |  DailyFX Research

Euro-Zone October industrial production declined 1.2% m/m, after falling 1.8% m/m in the previous month. This was slightly weaker than expectations for a decline of 1.0% m/m and meant production declined 1.1% in the three months to October, which suggests that the economic contraction continued into Q4. The breakdown showed capital goods production as well as intermediate goods production down 2.0% m/m, while the production of durable consumer goods decline 1.4%, so a broad slowdown in activity. Data back estimates of another negative Q4 GDP number, but are too backward looking to change the growth outlook or spur new cuts.
Euro-Zone Q3 labor cost inflation accelerated to 4.0% y/y from an upwardly revised 2.8% y/y (previously 2.7%) in the previous month. The country breakdown showed an accelerated to 2.5% y/y in Germany, from 0.7% y/y in the previous quarter. Spanish labor costs rose a whopping 6.1% y/y, up from 4.8% y/y in Q2. Data highlight that there are still some lingering second round effects from previous energy price increases, especially in countries with wide spread wage indexation, such as Spain. This also supports the ECB's view that while headline inflation may dip below zero for some months due to base effects, this is not serious deflation.

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