Eurozone monthly industrial production was weaker than expected in July, pulled down by a slump in durable consumer goods, and pointing to slowing economic growth in the second half of the year. The European Union's statistics office, Eurostat, said industrial production in the 16 countries using the euro was flat month-on-month for a 7.1 percent year-on-year rise.
-- Industrial production weaker than expected in July
-- Output much higher than a year earlier
Economists polled by Reuters had expected a 0.2 percent monthly increase and an 8.0 percent annual gain. Eurostat also revised down its June production figures to -0.2 percent month-on-month from -0.1 percent but raised the year-on-year number for June to an increase of 8.3 percent from 8.2 percent.
"The weak reading comes after a 0.2 percent decline in June, hinting at an appreciable loss of industrial momentum at the beginning of the third quarter," said Marco Valli, economist at UniCredit. "While the industrial production dynamic has come to a complete halt in June-July, business surveys suggest a much more moderate deceleration of factory activity from the cyclical peak hit in early spring," he added. "We continue to expect GDP growth to ease to around 0.4 percent quarter-on-quarter in the third quarter."
Other data from Germany showed investor sentiment turned negative in September for the first time since March 2009, a further sign that Europe's biggest economy is losing momentum as the government reins in budget stimulus. Industrial production accounted for less than 17 percent of eurozone GDP in the second quarter but because of its knock-on effects on other sectors it is still a good proxy for estimating gross domestic product growth.
The European Commission forecast on Monday that eurozone economic growth would slow to 0.5 percent quarter-on-quarter in the third quarter and to 0.3 percent in the last three months of the year from 1.0 percent in the April-June period.
"The last two months of weak outcomes could be a tentative sign that (the) turn in the world trade cycle has finally reached the eurozone," said Nick Kounis, economist at ABN Amro.
"We expect the industrial sector to slow to moderate growth rates in the coming months. The fall in the euro in trade-weighted terms and the gradual nature of the slowdown in global growth suggests that the slowdown will not be too dramatic." Eurostat said separately that nominal hourly labour costs, adjusted for the number of working days, rose 1.6 percent year-on-year in the second quarter of 2010 after a downwardly revised 1.9 percent gain in the first three months of the year.
Since eurozone inflation in the second quarter was 1.5 percent year-on-year, real hourly labour costs nearly did not grow at all. Of the total, wages grew by 1.5 percent year-on-year after a 1.8 percent expansion in the previous quarter and non-wage labour costs rose 2.0 percent, down from 2.2 percent.
Labour costs in Greece, which is implementing an austerity programme as a condition for an international bailout, fell 3.9 percent. Spain, hit hard by a crisis in the construction sector, saw labour costs fall by 0.3 percent. Labour cost growth in Germany, which is known for its cost restraint, was 1.1 percent in the April-June period after a 0.6 percent increase in the previous three months.
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