Eurozone industrial production slumps in May

Seasonally adjusted industrial production fell by 1.2 percent in the 19-country eurozone in May compared with the previous month, official data showed on Wednesday.

In the wider 28-country European Union (EU), seasonally adjusted industrial production declined by 1.1 percent on a monthly basis, said Eurostat, the bloc's statistical office.

In April 2016, industrial production rose by 1.4 percent in the eurozone and by 1.5 percent in the EU, it added.

Compared with May 2015, industrial production in May this year increased by 0.5 percent in the eurozone and by 1.1 percent in the EU, Eurostat said.

The single-currency's monthly decrease in May 2016 was mainly due to production of energy falling by 4.3 percent and capital goods by 2.3 percent. In the EU, production of energy fell by 3.3 percent and capital goods fell by 2.0 percent.

May's fall in eurozone industrial production reversed almost all of April's strong gain and suggests that industry will probably detract from eurozone gross domestic product (GDP) growth in the second quarter, said Stephen Brown, European economist at Capital Economics, a London-based economic research consultancy.

Survey evidence suggests that industrial firms are struggling to pass on recent commodity price rises to their customers, which implies that demand remains subdued, Brown said.

The negative impact of the United Kingdom's Brexit vote on sentiment is also set to weigh on industrial prospects. That supports the long-held view that eurozone growth will continue to slow and adds to the pressure on the European Central Bank to loosen policy further, Brown added.

Among member states, industrial production in the Netherlands has seen the sharpest contraction of 7.8 percent.

Figures in Germany and France also disappointed with declines of 1.3 percent and 0.5 percent respectively.

"The weakness was broad-based across all the major economies, and production also fell in most of the smaller countries. Across sectors, large falls in energy and capital goods output were the key drivers of the fall, but production fell in all sub-industries," said Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, also an economic research firm.

Vistesen said this poor performance painted a grim picture for industrial production growth in the second quarter.

"Even with our assumption that output bounced back with a 1.1-percent month-to-month gain in June, production still fell 0.3 percent quarterly. This indicates that eurozone GDP growth slowed significantly in the second quarter, from a sizeable rise in the first three months," he said. Endit