Euro area industrial production falls short as Germany drags

Industrial production in the euro area fell well short of forecasts in June as supply side constraints dragged on growth, especially in Germany.

According to Eurostat, in seasonally adjusted terms, Eurozone industrial output fell at a month-on-month pace of 0.3% (consensus: +0.2%).

By countries, Austria (-1.4%), Finland (-2.0%), Germany (-1.0%), and Portugal (-2.6%) saw the biggest drops.

In France, Italy and Spain on the other hand, industrial production increased.

Weakness in capital goods production was responsible for the bulk of the drop in total output, falling by 1.5% on the month.

Euro area energy production fell by 0.6% alongside.

Total industrial production for May was revised down by a tenth of a percentage point to show a contraction of 1.1%.

By sectors, automobile production shrank by 1.8% on the month with Barclays Research attributing the drop to supply side constraints.

Output of machinery decreased by 1.1% and that of computers by 2.6%.

Quarter-on-quarter, euro area industrial output was off by 0.1% in the three months to June, Barclays estimated, following growth of 1.1% in the prior quarter.

The investment bank's forecast for quarterly euro area GDP growth over the three months to September was 2.8%.

Commenting on the latest figures, Mark Cus Babic at Barclays said: "Going forward, developments in supply bottlenecks will be critical, but remain highly uncertain. While shortening PMI supplier delivery times offer some hope, we do not see any quick fixes and note that some constraints, such as the chip shortage, are only expected to start improving into the year-end."

Claus Vistesen at Pantheon Macroeconomics was in a similar frame of mind, telling clients: "Looking ahead, business surveys point to solid growth in EZ industrial production in July.

"But the surveys have overstated growth in industry in recent months. We suspect that supply constraints will continue to weigh on industry until at least the end of the year, and do not expect much from readings for industrial production over H2."