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Euro-Region June Industrial Output Falls; France Grinds to Halt

A worker grinds metal as he helps to renew the furnace, Schwelgern 1 at the ThyssenKrupp AG steel plant, in Duisburg, Germany.  Photographer: Wolfgang von Brauchitsch/Bloomberg
A worker grinds metal as he helps to renew the furnace, Schwelgern 1 at the ThyssenKrupp AG steel plant, in Duisburg, Germany. Photographer: Wolfgang von Brauchitsch/Bloomberg

Aug. 12 (Bloomberg) -- European industrial production unexpectedly fell in June and France’s economy stalled in the second quarter, adding to signs that growth is losing momentum as governments struggle to contain the debt crisis.

Production in the 17-nation euro area slipped 0.7 percent from May, the European Union’s statistics office in Luxembourg said today. In France, the economy failed to expand from the first quarter, according to Paris-based statistics office Insee, missing the median forecast of 0.3 percent growth in a Bloomberg News survey of 15 economists.

European leaders last month pledged a second bailout package for Greece in a bid to restore investor confidence and prevent the crisis from spreading across the region. While companies including German carmaker Porsche AG are relying on faster-growing markets to fuel sales, European economic confidence weakened in July and manufacturing growth slowed, according to Markit Economics’ gauge based on a survey of purchasing managers.

“The outlook for the second half of the year looks gloomy,” said Nick Kounis, head of macroeconomic research at ABN Amro in Amsterdam. “We expect the economy to remain sluggish and there is a considerable risk of recession.”

The euro was little changed after the report, trading at $1.4236 at 11:58 a.m. in Brussels. The currency has appreciated 6.4 percent against the dollar this year.

Greek Slump

Economists had forecast euro-region output to remain unchanged from the previous month, the median of 30 estimates in a Bloomberg News survey showed. It was the biggest monthly drop since Sept. 2010. Output increased 2.9 percent in the year.

Euro-region growth probably weakened in the second quarter from 0.8 percent in the previous three months, European Central Bank President Jean-Claude Trichet said on Aug. 4. In the year, the economy may expand about 1.9 percent before cooling to 1.7 percent in 2012, the Frankfurt-based central bank estimates.

Greece’s economy contracted 6.9 percent in the second quarter from a year earlier, a separate report showed today. Germany, Europe’s largest economy, is scheduled to publish second-quarter GDP on Aug. 16. The EU’s statistics office will release its report on the same day.

“Recent economic data indicate a deceleration in the pace of economic growth in the past few months,” the ECB said in its monthly report published yesterday. “Uncertainty is particularly high. Downside risks may have intensified.”

Russia, Hong Kong

Economies around the globe are also cooling, suggesting European companies may struggle to maintain their export sales growth. Hong Kong’s economy shrank for the first time since the global financial crisis in the second quarter. In Russia, economic growth weakened for the second consecutive quarter.

With governments cutting spending and raising taxes to lower budget deficits, companies have relied on emerging-market demand to bolster orders. Porsche, the German sports-car maker, said on Aug. 1 that first-quarter operating profit jumped 59 percent, with the fastest sales growth in China. Italian rival Ferrari SpA said last month that first-half sales more than doubled in the Greater China region.

ThyssenKrupp AG, Germany’s largest steelmaker, today reported third-quarter earnings that missed analysts’ estimates. The Essen, Germany-based company said European demand is dropping “sharply.”

Euro-region output of capital goods slumped 1.5 percent in June from the previous month, when it rose 1.1 percent, today’s report showed. Energy production slipped 0.4 percent and output of intermediate goods decreased 0.6 percent. Production of durable consumer goods declined 2.5 percent from May.

Global ‘Uncertainties’

Europe’s economy may not be able to rely on industrial demand to help drive an expansion. Chinese industrial-production growth slowed in July from a year earlier.

In Europe, concern about a budget crisis spilling over into the broader economy led to a 25 percent decline in the Stoxx Europe 600 Index over the past six months. Volkswagen AG, Europe’s largest automaker, said last month it expects demand in its home western European market to be “burdened” in the second half, while global economic growth may slow somewhat.

“The global environment is marked by uncertainties,” Peter Loescher, chief executive officer at Siemens AG, Europe’s largest engineering company, said on July 28. “The global economy continues to grow. However, the upswing is losing momentum” and there “are a number of risks.”

To contact the reporter on this story: Simone Meier in Zurich at

To contact the editor responsible for this story: Craig Stirling at

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