Eurozone industrial output slumps record low

Eurozone industrial production had its biggest ever fall on record in February, sinking 18.4 per cent on year-on-year basis, as reported by the European Union (EU) statistics agency, Eurostat in Luxembourg on Thursday.
 
Compared to January, the production dropped 2.3 per cent, the sixth month of decline in a row, underlining the severity of the global recession.

The data pointed to a quarterly GDP contraction of 1.7 per cent against 1.6 per cent in the previous quarter, he said, indicating that the industrial recession had deepened further in the first quarter.

Less optimistic analysts believe the GDP is unlikely to shrink by much less than 2 per cent quarter on quarter, thus paving the way for a 4.5 per cent decline in the full year.

The Eurozone consists of 16 EU states that have adopted the euro as their sole currency and includes: Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain.

In the 27-nation EU too the yearly fall was marginally lower at 17.5 per cent, and the output dropped 1.9 per cent in February compared to January.
 
The yearly drops were severest for Estonia, Latvia and Spain which saw 30.2 per cent, 24.2 per cent and 22 per cent falls, respectively.
 
The worst monthly falls in the range of 4.1 per cent to 3.2 per cent were recorded for Lithuania, Estonia, Italy and Germany.

The only countries which bucked the trend were Portugal where production rose by 2.4 per cent, Greece 1.7 per cent and Poland 0.4 per cent. The UK registered a fall of 1.2 per cent.

Big drops in capital goods (24.7 per cent), durables (24.2 per cent) and intermediate goods (22.1 per cent) contributed heavily to the fall.

Non-durables fell 6.3 per cent and energy dropped 3.6 per cent.

The grim figures emerged following the production cut backs and job cuts by European factories due to fall in global demand for their products.

A monthly survey indicated that the companies are in no mood to boost production soon as they felt the inventory levels were too very high.

The Organisation of Economic Cooperation and Development said last week that the world economy is in a ''deep slowdown''.

The world's largest economy, the US registered a drop in industrial output in March, hitting a decade low figure of 1.5 per cent. (See: US industrial output falls to 10-year low in March).

China, the world's third largest economy, grew by 6.1 per cent during the first quarter, the slowest growth in 10 years. (See: China's first quarter GDP at 10-year low)

Inflation woes
The Inflation fell down to an-all-time low of 0.6 per cent in March from 1.2 per cent in February, since comparable estimates began in 1996, pushing the need for policy easing by the European Central Bank (ECB). The inflation hit a record high of 4 per cent in last July.

ECB hopes inflation to be just below 2 per cent.
 
"Headline inflation should move sideways in April, and resume dropping in May, mostly on base effects, when it will approach the zero threshold" Marco Valli said.

"We still think that the first negative year-on-year reading will be in June, but there's a tangible risk that we may fall below zero as soon as next month. The trough should be in July at about -0.5 percent," he said.

Analysts expect ECB to take measures to arrest falling of inflation too far below the target. ECB said it saw no risk of deflation, adding that for deflation to exist, apart from negative inflation there should be negative expectations of consumers which would hold back their purchases.

ECB had made a series of interest rate cuts since last July from 4.25 per cent to the current 1.25 per cent. Analysts expect a further cut by 25 basis points in the next meeting scheduled on May 7 in addition to other policy easing measures.