"The underlying growth momentum is likely to be softening for services sectors, along with the slowdown of manufacturing growth,"
- HSBC chief China economist Hongbin Qu
The industrial production in the 17-nation bloc that has the Euro in circulation, shrank more than expected in May, indicating the longest post-war economic contraction and suggesting the economy will register the seventh consecutive quarter of shrinking GDP. Eurozone industrial output fell 0.3% month-on-month in May and was 1.3% lower on a yearly basis, while analysts expected a 0.2% and 1.3% contraction respectively. The decline was mostly driven by a 1.5% drop in capital goods output and a steeper fall of a 2.3% in durable consumer goods. As for the 27-member European Union the output was 0.6% lower from a month ago and 1.6% from the same period of last year. The only countries that recorded positive figures were Portugal, Latvia and Estonia, with industrial production increasing 6.1%, 2.2% and 2.0%, respectively.
As there are practically no signs of the improvement in the economy, the International Monetary Fund now expected the Eurozone to shrink 0.6% this year, and to recover in the next one, with the economic output expanding 0.9%. A recent drop in industrial production, which is a leading indicator of economic health as production reacts quickly to changes in the business cycle, is pointing at sluggish domestic demand and exports.
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