EU manufacturing output plummets in January

The EU's manufacturing output plummeted on the month and the year in January, preliminary data from EU statistics unit Eurostat show.

Seasonally and calendar-adjusted EU manufacturing output dropped to 98.6 against a 2021 baseline of 100 — the lowest for any month since September 2021 and a significant fall from 104.9 in December. Eurostat switched to a 2021 baseline year as of March.

Calendar-adjusted manufacturing output was down by 6.5pc from January 2023, with production mixed in the bloc's five largest economies — Germany, the Netherlands, Spain, Italy and France. Spain and France recorded minor growth on the year, more than offset by significant drops in the other three economies. The EU's largest economy, Germany, recorded a 5.4pc reduction, while the drop in the Netherlands was even steeper (see year-on-year graph).

Output was reduced in gas-intensive industries in particular in January, with output in all but the food products and beverages sector falling on the year. The non-metallic minerals sector led the decline, as was the case across much of last year, falling by 13.7pc from January 2023 (see year-on-year sector table). The most gas-intensive sector of all, chemicals, reduced output by 1.4pc on the year. In the motor vehicles sector — an important demand segment for other gas-intensive industries such as steel and glass — output in Germany was down by 11.7pc on the year to its lowest level against a 2021 baseline since May 2022. Data for the EU as a whole is not yet available.

Output falls on the month

EU manufacturing production in January was also much lower than in the previous month.

Seasonally and calendar-adjusted output was down by 6pc on the month, after December output reached what Eurostat said at the time was an all-time high. But Eurostat subsequently revised down its estimates for the month, now showing an increase from November of 5.1pc instead of the previously reported 6.8pc. December is no longer a historic high against the new 2021 base year, with manufacturing production last higher in February 2023. This may have been affected by a change in the weighting of different countries' manufacturing sectors.

January output was up on the month in Spain and Germany, but lower in France, Italy and the Netherlands. In the latter, production was down by a significant 4.6pc (see month-on-month graph). Overall Dutch manufacturing output fell by 2.6pc on the year in 2023, as high energy prices hit the chemicals and refining sectors particularly hard.

Output across most gas-intensive sectors was down on the month in January, although the chemicals sector grew by a marginal 0.2pc while the food and beverages sector continued to record growth. But the basic metals sector led the decline at 3.3pc, followed by non-metallic minerals at 1.4pc (see month-on-month sector table).

The EU's annual inflation rate of 2.8pc in February was its lowest in several years, and the European Central Bank (ECB) cut its inflation outlook for the year. But at the same time, the ECB kept its key lending rate at 4pc, and downgraded its expectations for economic growth this year. Eurostat's economic sentiment indicator edged down to 95.4 in February against a long-term rolling average of 100, slightly below January.

But the eurozone's manufacturing sector showed tentative signs of recovery in February, with forward-looking indicators including new orders and purchasing activity making the smallest declines for nearly a year.

By Brendan A'Hearn

Y-o-Y percentage change in manufacturing by country

M-o-M percentage change in manufacturing by country