European industrial production unexpectedly stagnated in July, adding to signs that the euro region's export-led recovery is losing momentum.
Economists had projected a gain of 0.1 per cent in July. In June, output in the economy of the 16 euro nations fell 0.2 per cent, the European Union's statistics office in Luxembourg said today.
A separate release showed that euro-region labour costs rose 1.6 per cent in the second quarter from a year earlier, the weakest since the data were first compiled in 2000.
Europe's economy may struggle to gather strength as the global recovery cools and governments cut spending to reduce budget deficits. The European Commission yesterday forecast a more "moderate" expansion in the second half and European Central Bank council member Mario Draghi said on September 2nd that the recovery remains "weak" and "fragile."
Meanwhile, in Germany, Europe's largest economy, investor confidence dropped more than economists forecast to a 19-month low in September, the ZEW Center for European Economic Research in Mannheim said today.
The euro dropped after the ZEW report, falling to $1.2852 at 11:18 a.m. in Frankfurt from $1.2883. Bonds extended their gain, with the yield on the German 10-year bund down 7 basis points on the day to 2.36 per cent.
Industrial output rose 7.1 percent in July from a year earlier after increasing 8.3 percent in June, today's
report showed. Production of intermediate goods fell 0.3 per cent from June while output of durable consumer goods dropped 0.6 per cent and energy production slipped 0.1 per cent. Output of capital goods such as factory machinery rose 0.1 per cent in the month.
Reviving export demand helped the euro-region economy expand 1 per cent in the second quarter, the fastest pace in four years. The Brussels-based commission said yesterday that growth may weaken to 0.5 per cent in the current quarter and 0.3 per cent in the year's final three months.
So far, stronger growth hasn't translated into faster job creation. Euro-region unemployment held at 10 per cent in July, the highest in almost 12 years. German wage costs rose 0.7 per cent in the second quarter from a year earlier, today's report showed. Labour costs increased 3.8 per cent in France, while Greek labor costs dropped 1.8 per cent.