EU June manufacturing output down on year, up on month

EU manufacturing output was much lower in June compared with a year earlier but edged higher from the previous month, preliminary data from Eurostat show.

Seasonally and calendar-adjusted EU manufacturing output dropped to 99.6 against a 2021 baseline of 100, down by a significant 4.2 basis points on the year but up by 0.1 points compared with May.

In more absolute terms, EU manufacturing output was down by 3.8pc from June 2023. Manufacturing production has dropped on the year for every month since July 2023 except for December.

Output fell in four of the bloc's five largest economies — Germany, the Netherlands, Spain, Italy and France. Production was 4.6pc lower than a year earlier in Germany, the EU's largest economy, while only Spanish output increased (see year-on-year graph). Spain's economy has proved more resilient than that of any other major EU country over the past two years.

Irish manufacturing data has become declassified, having previously been kept private. Ireland has a disproportionate effect on total EU data, with a weighting of 8.9pc in the 2021 baseline year. A large part of Ireland's manufacturing is performed outside the EU but counted as Irish production, with non gas-intensive sectors such as pharmaceuticals and electronics dominating. Because Irish manufacturing is based on large foreign orders performed overseas, it swings significantly from month to month, and in June was down by nearly 18pc on the year. But while Irish data are now declassified, Slovenian manufacturing data appear to be unavailable, having previously been viewable.

Output was mixed across gas-intensive industries. Production in the most gas-intensive of all industries, the chemicals and chemical products sector, climbed by 5.7pc on the year, albeit from a low point of comparison. This was a fifth consecutive month of increase, as European production slowly recovers from the lows of late last year. Output in the food products and beverages, coke and refined petroleum products, and paper and paper products sectors was also up, while basic metals returned to year-on-year growth for just the second time since February 2022.

The non-metallic minerals sector continued to struggle, with output down by 1.9pc on the year (see table). But this was the smallest decrease since August 2022, which could suggest that production is nearing the point of bottoming out. Non-metallic minerals output last grew on the year in May 2022.

In the motor vehicles sector — crucial for demand of other gas-intensive goods such as glass, steel and chemicals — output was down by 3.4pc on the year, falling for a sixth consecutive month. This contrasts with 2023, when output was up on the year in every month as chip shortages eased from early 2022. In construction, a similarly important tertiary sector, the most recent data for May put EU production at 102.3 compared with a 2021 baseline, the lowest for any month since December 2022. High interest rates across the EU have increased the cost of borrowing for consumers, consequently weakening demand for large investments such as cars and houses.

Eurozone manufacturing production contracted again in July, according to data compiled earlier this month. "The widely held belief that the eurozone's recovery would pick up speed in the second half of the year is taking a hit," Hamburg Commercial Bank chief economist Cyrus de la Rubia said. "We'll probably need to lower our GDP growth forecast for the year from 0.8pc." GDP growth in the eurozone was just 0.3pc in both the first and second quarters of this year, according to Eurostat.

By Brendan A'Hearn

Percentage change in manufacturing by country, M-o-M

Percentage change in manufacturing by country, Y-o-Y