French industrial production rose strongly in July but weaker performances by Italy and Germany did little to dispel fears that Europe's economic recovery is losing pace after a surprisingly large second-quarter spurt. France's statistics said industrial output, propelled by a recovery in auto industry production, rose 0.9 percent versus June, when it dropped 1.7 percent.
Italy output loses steam Manufacturing output, often seen as a more precise gauge of activity, rose 1.4 percent after a June drop of 1.2 percent, due largely to the fact that car production rebounded, rising 6.7 percent in July after a 6.5 percent monthly decline in June.
That looked far stronger than the figures reported by Italy and on Wednesday by Germany, both of which said output rose by just 0.1 percent in July from the previous month. Italy's 0.1 percent rise fell far short of forecasts of a 0.5 percent improvement while Germany's 0.1 percent increase fell even shorter of economists' expectations, which were for a strong 1.0 percent rise. That made a positive surprise unlikely when aggregate data for industrial production in the 16-country euro currency zone as a whole are published next Monday, in a first indication of how well the region's economy started the third quarter.
A Reuters survey conducted before the news out of France and Italy on Friday showed economists on average expect a 0.2 percent rise in aggregate output in the eurozone for July, in a report due from the EU statistics office Eurostat. Industrial output fell 0.1 percent in June at the level of the euro zone. Italy's data on Friday was the last of the reports from the "big three" economies of the common currency area.
"The figure is a bit disappointing and that echoes what we saw in German output earlier this week. It suggests that we are seeing a loss of momentum in world demand," said Gilles Moec of Deutsche Bank. "It's true that French output was good today but France is a little less sensitive to fluctuations in demand outside the EU." Economists were pleased to see French output fare relatively well but remained cautious, not only because French auto industry output has been swinging wildly in recent months.
"This masks that an underlying slowdown is under way, as a moderation in global growth and a less positive stimulus from the inventory cycle are likely to make their presence felt," said ABN Amro economist Joost Beaumont. France's central bank nonetheless said this week industrial output held steady in August according to a business survey it conducts every month, and it said weakness in the auto industry was being offset by growth in other sectors.
Euro zone gross domestic product growth rose a surprisingly strong 1.0 percent quarter-on-quarter in the April-June period, largely due to a German surge, after 0.3 percent in the first quarter. But the OECD said on Thursday that growth in Europe and world-wide appeared to be slowing more sharply than it had previously expected and that more monetary stimulus might be needed to limit the extent of the deceleration.