Weak euro area industrial production for February leaves economists divided

Euro area industrial production registered an unexpected decline in February as energy output shrank rapidly, leaving economists a tad divided on the outlook.

Total industrial production fell by 0.3% month-on-month, according to Eurostat, surprising economists who had expected a 0.1% rise.

January's preliminary estimate was marked down as well, from a 0.9% gain to an advance of 0.3%.

In comparison to the same month one year-ago, production was ahead by 1.2% (consensus: 1.9%).

A 4.7% drop in energy output in comparison to January was the main culprit, even as output of capital goods added to the prior month's 1.9% month-on-month increase by rising another 0.9%.

Production of intermediate goods grew by 1.0% compared to the previous before, while that of durable consumer goods was unchanged and that of non-durable goods declined 1.1%.

Growth slowed in all of the single currency bloc's largest economies, with production in Germany slowing from a 2.4% rise in January to a 0.8% gain in February, whereas in France it fell by 1.6%, in Spain by 0.3% and in the Netherlands by 0.5%.

In Ireland production fell by 15.5% month-on-month.

"This means that despite robust manufacturing surveys through the first quarter from the purchasing managers, industrial production is unlikely to have made a significant contribution to Eurozone GDP growth," said Dr. Howard Archer, chief Europen+Uk economist at IHS Markit.

In fact, total production needed to reboud by 0.5% in March just for the quarterly rate of change in production to remain flat, he said.

Nevertheless, health growth did look possible given the very strong surveys which were pointing to a rebound in energy output.

Jennifer McKeown, chief Eurozone economist at Capital Economics, was more upbeat, telling clients: "the message from the business surveys that euro-zone GDP growth gained pace in Q1 after Q4’s 0.4% quarterly rise seems unlikely to be correct. Further ahead, though, the manufacturing PMI points to a sharp rise in annual industrial growth from February’s 1.2% to as high as 5%, presumably supported by healthy global demand and a weak euro exchange rate."