Arthur J. Villasanta – Fourth Estate Contributor
Luxembourg City, Luxembourg (4E) – Hopes for an economic rebound in the 19-nation Eurozone have fizzled following disheartening news the zone’s industrial output posted its biggest fall in nearly three years in November.
Eurostat, the European Union’s statistics office, estimated that industrial production in Eurozone tumbled by 1.7 percent in November month-on-month. This is the worst reading since February 2016 after a modest, downwardly revised 0.1 percent rise in October.
The plunge was mostly due to a large drop in the production of capital goods such as machinery.
The lackluster result again raises concerns about the currency bloc’s economic growth in the final quarter of 2018 and cast doubt over the timing of the next rate hike by the European Central Bank or ECB.
Slower growth in Q4 might compel the ECB to review its forecast of a 1.7 percent GDP rise for the entire year of 2018. In December, the ECB promised to keep rates at current record lows until the summer.
It also made no attempt to change market expectations that a first post-crisis interest rate rise will come only in early 2020.
Economists had expected a drop but one that was smaller than official estimates. Markets expectations were for a 1.5 percent monthly drop and a 2.3 percent fall year-on-year.
Economists now estimate the bloc’s growth is more likely to remain slow in the last three months of 2018.
“The euro zone has clearly shifted down a gear,” said Andrew Kenningham, an economist at research firm Capital Economics.
He said the Eurozone might still see out a small increase in its gross domestic product in the last quarter, but the new output figures sent a negative signal.
The Eurozone’s economy grew by only 0.2 percent in the third quarter, down from growth of 0.4 percent in the second. Hopes of a rebound are fading in light of the depressing news.
The risks of recession in Germany and Italy have risen.
Germany, the largest economy in the zone, saw its industrial output fall by 1.9 percent in November from October against earlier forecasts of a 0.3 percent rise. Production also fell significantly in France and Italy, the second and third biggest economies in the bloc.
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