"Europe is getting more and more Japanese"
-Carsten Brzeski, an economist with ING
Industrial production in France, Italy and the Netherlands surprised sharply to the downside in May, joining Europe's powerhouse Germany, which earlier this week reported output suffered the biggest monthly drop in two years in May, casting further doubts over the Euro zone's prospects for recovery this year. According to the figures from the statistical office INSEE, French industrial output plunged 1.7%, translating into a 3.7% year-on-year decline, and inflation declined to the lowest level since 2009. Manufacturing sector output was also 2.3% down after a flat month in April. Italy's factories also experienced a 1.2% drop in output, the steepest decline in more than a year and a half. While energy climbed 0.8%, investment goods, a key driver of Italy's subdued economic recovery, fell 1.7%, consumer and intermediate goods also dropped 1.5%. ISTAT's latest report highlights the fact that Italy's fragile economy continues to struggle to recover, while economists warn Italy might enter a recession for the third time in five years.
Across the whole Euro zone, analysts project growth in the second quarter at around 0.2%, on a quarterly basis, as seen in the three months to March. There is a wider debate across Europe about whether to shift the policy focus towards spending to support the region's economy and away from spending cuts and austerity.
© Dukascopy Bank SA