French and Italian industrial production for February point to downside risks

Industrial production in the euro area's second and third-largest economies held up in February, but mostly as a result of a surge in energy output, on the back of cold weather, which helped to offset some of the weakness in manufacturing.

In Italy, total output was only moderately lower in February, dipping by 0.5% month-on-month, according to ISTAT.

Last month's print undershot forecasts for a rise of 0.9%, as increases in mining and energy production of 2.9% and 9.5%, respectively, more than offset a 2.3% fall at factories.

By industry groups, and versus the prior month, production of consumer goods declined by 2.4% versus January, led by a 2.5% drop in output of non-durable consumer goods.

Production of capital goods meanwhile decreased by 1.0% and that of intermediate ones by another 1.5%.

Energy output on the other hand jumped by 8.1% when compared against the month previous month.

In comparison to a year ago, total industrial production was ahead by 2.5%.

It was a somewhat better story over in France last month, with industrial production growing by 1.2% on the month (consensus: 1.4%), according to INSEE, alongside upwards revisions to figures for the prior month.

However, in manufacturing output retreated by 0.6% on the month, its fourth consecutive monthly drop.

The French data led economists at Barclays Research to tell clients they would not be surprised by a quarter-on-quarter GDP print of 0.4% for the first three months of 2018, down from the 0.7% observed in the fourth quarter of 2017.

For her part, and commenting on the Italian and French data combined, Jessica Hinds, European economist at Capital Economics, said: "National data suggest that the euro-zone's industrial sector fared poorly in February, despite whopping rises in energy production as a result of the unseasonably cold weather across much of the region.

"However, [...] the annual rates of growth are still pretty strong by recent standards. And the industrial surveys do not point to sharp slowdown to come."

UniCredit Bank's Loredana Maria Federico meanwhile chipped in: "Signs of a slowdown in the pace of expansion of global trade need to be carefully monitored going forward, as there is the risk that momentum in industrial activity might be weaker than last year."