Eurozone Industrial Output Falls; Trade Deficit Widens

(RTTNews) - Reflective of weak economic activity towards the end of the year, Eurozone industrial production declined more than expected and the trade deficit widened in December, suggesting that the currency bloc is not far from a recession.

Industrial production was down 1.1 percent on a monthly basis in December, in contrast to the 1.4 percent increase in November, Eurostat reported. Output was forecast to fall 0.8 percent.

All sub-components posted decline in December except energy output, which gained 1.3 percent. Production of intermediate goods slid 2.8 percent and that of durable consumer goods by 1.4 percent.

Non-durable consumer goods and capital goods output declined 1.0 percent and 0.4 percent, respectively. Further, industrial production logged its first annual decline in five months in December. Production eased 1.7 percent, in contrast to the 2.8 percent increase in November and bigger than economists' forecast of -0.7 percent.

Separate data from Eurostat showed that the trade balance swung to deficit in 2022. The trade deficit totaled EUR 314.7 billion in 2022 compared with a EUR 116.4 billion surplus in the previous year.

Data showed that exports grew notably by 18.0 percent. At the same time, imports logged a much faster increase of 37.5 percent.

In December, the trade deficit rose to EUR 18.1 billion from EUR 14.4 billion in November.

Month-on-month, exports decreased by a seasonally adjusted 4.6 percent and imports fell 2.9 percent.

Industrial output and foreign trade data highlight the weakening in the economy at the end of last year, Capital Economics' economist Adrian Prettejohn said.

The economist expects the economy to enter a recession this year as the squeeze on real incomes and past monetary tightening dampen domestic demand, while exports will also struggle.

"Given continued weak demand and supply side problems, we cannot expect much more than a path of stagnation for industry," ING economist Bert Colijn said. "A rebound is too much to ask for at the moment."

However, the economic forecast from the EU suggested that euro area is set to avoid a recession and gradually pick up pace next year following the favorable development in energy prices and the diversification of supply sources. The EU forecast the euro area to expand 0.9 percent this year and 1.5 percent in 2024.

In the latest World Economic Outlook Update, released in January, the International Monetary Fund projected growth in Eurozone to bottom out at 0.7 percent this year before improving to 1.6 percent in 2024.