Eurozone industrial output unexpectedly fell in November as sharp declines in factory production across southern Europe offset encouraging signs of growth in Germany, raising fears that the effects of the debt crisis have yet to bottom out.
Industrial production in the single currency area dropped 0.3 per cent in November from October, marking the third consecutive fall, according to Eurostat, the EU’s statistical office. On an annual basis factory output plummeted 3.7 per cent.
The poor industrial output performance, in sharp contrast with economists’ expectations of a rise in activity, has cast serious doubts over analysts’ predictions that the worst part of the sovereign debt crisis is over.
A steady number of small and large companies have been shedding thousands of jobs – pushing unemployment to an all-time high since the introduction of the single currency in 1999 – and are wary of making any new investments.
Annual investment in the 27 countries of the EU dropped by more than €350bn between 2007 and 2011, according to a study published last month by McKinsey, a clear indication that the bloc is unlikely to see a swift return to economic growth.
Among the countries that suffered the sharpest contraction in production in November were Italy and Spain, where output fell 1 per cent and 2.5 per cent respectively.
Weak data from Rome and Madrid weighed on the entire eurozone and cancelled out the marginal improvements in Germany and France, where output rose 0.1 per cent and 0.5 per cent respectively.
However, several economists said that despite the negative November data there were more recent indicators suggesting that Europe could return to economic growth early this year. They include falling yields on sovereign bonds, strong capital inflows, an increase in bank deposits and an improvement in business confidence surveys.
“The worst is behind us,” David Mackie, an economist at JPMorgan, said. “We believe that the euro area will exit recession in the first half of this year.”