Line chart of Industrial production, rebased (June 2019 = 100) showing Eurozone industry claws its way back towards pre-virus output level

Eurozone economies’ industrial output edges closer to pre-virus levels

Industrial output in three of the eurozone’s largest economies increased by more than expected in June, as governments lifted their most stringent lockdown measures.

The biggest monthly gain in production — for manufacturing, mining and utilities — was reported in Spain, where output rose 14.0 per cent from the previous month. France reported an increase of 12.7 per cent, while Germany reported a rise of 8.9 per cent. Economists polled by Reuters had expected gains of 11.8 per cent, 8.9 per cent and 8.1 per cent, respectively.

Car industries across the three economies picked up substantially from a low base, in a sign that the region’s car industry is reviving. In Spain, clothes manufacturing rose sharply as shoppers returned to the high street after lockdown restrictions were lifted.

But production was still well below pre-pandemic levels and the resurgence of coronavirus cases in several European countries in recent weeks is raising fears that measures to control a resurgence of the virus could once again hit European industry, damping its chances of a quick recovery.

Compared with the same month the previous year, industrial output in June was still down 14.0 per cent in Spain and 11.7 per cent in both France and Germany.

Spain has been one of the major European economies hardest hit by the pandemic, with gross domestic product dropping 18.5 per cent in the second quarter of the year. More than 1m people lost their jobs as a result.

Separate data also published on Friday showed that trade in Germany and France continued to recover from the shock of the pandemic in June.

Germany benefited from increased trade with China; its exports to the country rose 15 per cent. Its overall trade surplus extended by €7bn from the previous month.

“With these strong numbers, some upward revision of the second-quarter GDP data should not be excluded,” said Carsten Brzeski, chief economist at ING.

Germany’s recovery has so far been the strongest among the major European economies, and a survey released on Friday indicated that German industrial companies expect the momentum of recovery to continue.

Yet its economy is also dependent on the health of its trading partners. The volume of trade remains roughly 10 per cent lower compared with the same period in 2019, showing that there is some mileage to cover to recoup the losses to trade incurred because of the pandemic.

Trade with Germany for the US and the UK, which have struggled to contain outbreaks of coronavirus, fell about a fifth, although the declines softened compared with May.

“Despite the government’s generous fiscal support, we doubt that rising domestic expenditure will fully compensate for the weakness of demand in Germany’s key export markets,” said Andrew Kennington, chief European economist at Capital Economics.

French imports rose by more than its exports, and the country’s overall trade deficit widened to an all-time high of €7.9bn in June.

“Looking ahead, the recovery (for France) will continue, but it will be a lot slower than implied by the initial rebound out of lockdown,” said Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics.