Monday, June 14, 2021 5:40 AM EST
Despite widespread production problems, Eurozone industrial production continues to grow. With demand continuing to come in quickly, the outlook for industry remains bright and seems likely to be curbed by supply side constraints.
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Eurozone industrial output grew by 0.8% in April despite widespread production problems.
The growth in production was mixed between large markets, which are differently affected by pressing shortages. German production has been significantly disrupted by semiconductor chip shortages as the auto industry is one of the most dominant industries resulting in another decline in overall German industrial production in April. Spain and Italy have continued to see production grow while France saw production stagnate. For now, clearly, production growth is being subdued by supply constraints for now (EZU).
The outlook for the sector remains bright though, which adds to expectations of a positive contribution from production to GDP growth in 2Q. The key concerns for industry are supply chain disruptions, price pressures and whether reopening of services dampens demand for goods. There is not much evidence from business surveys for the latter for now though as new orders continue to come in very rapidly despite easing of service sector restrictions.
The key question is when will supply chain disruptions fade?
We expect shipping price pressures to remain for the next few months ahead, which also holds good for several of the most pressing input shortages for the eurozone industry. This means that while demand for goods remains very strong at the moment, industrial output could underperform given longer lead times and production hiccups. That being said, we expect production to keep rising on strong demand, low inventories and increased lead times.
Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any ...
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Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any particular user's investment objectives, financial situation, or means. ING forms part of ING Group (being for this purpose ING Group NV and its subsidiary and affiliated companies). The information in the publication is not an investment recommendation and it is not investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Reasonable care has been taken to ensure that this publication is not untrue or misleading when published, but ING does not represent that it is accurate or complete. ING does not accept any liability for any direct, indirect or consequential loss arising from any use of this publication. Unless otherwise stated, any views, forecasts, or estimates are solely those of the author(s), as of the date of the publication and are subject to change without notice.
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