Euro zone industrial production plunged by a record amount in December, data showed today, pointing to a deepening recession in the single currency area and adding to the case for a deep ECB rate cut next month.
Industrial production in the 15 countries that were using the euro in December fell 2.6 per cent month-on-month and 12 per cent year-on-year, the steepest monthly and annual drops since records started in 1990, the European Union statistics office said.
Economists polled by Reuters had expected a 2.1 per cent monthly drop and an 8.9 per cent annual fall.
Eurostat also revised output data for November to a monthly contraction of 2.2 per cent from the previously reported 1.6 per cent and to an annual fall of 8.4 per cent from 7.7 per cent.
“The economy took a breathtaking turn for the worse at the end of last year in the aftermath of the near collapse of the financial system,” Nick Kounis, economist at Fortis.
“The figures add to the already strong case for the ECB to do more, not just in terms of cutting rates further in March, but also in terms of stepping up its efforts to ease financial conditions by an aggressive expansion of its balance sheet,” he said.
The European Central Bank, which has cut rates by a total of 225 basis points to 2.0 percent since October, has signalled it may reduce them again in March as the economy sinks deeper into recession while inflation decelerates sharply.
But there is pressure for the ECB to consider also other forms of monetary easing, for example through purchases of government or even corporate securities to further boost liquidity in still choked credit markets.
Economists estimated the industrial production drop would translate into a 1.2 to 1.5 per cent quarterly fall in euro zone gross domestic product.
A 1.3 per cent quarterly contraction in the euro zone would be the biggest since records began in 1980, Mr Kounis said.
Reuters