Eurozone industrial production fell 0.1% in April compared to March, meaning production was 3% lower than a year ago. Political and other risks remain, but some signs of bottoming out are beginning to emerge, and a cautious recovery is expected in the second half of the year.
Eurozone industry has been in recession since the beginning of 2023, and the latest data shows no signs of recovery. Although the economy has started to recover since the beginning of the year, industry has lagged behind in the recovery. Production data for April showed a small decrease, mainly due to Ireland and Italy. Hopes for a recovery are rising, but so far the data still shows little signs of recovery.
This comes shortly after the European Commission announced the increase of tariffs on Chinese-made electric vehicles from early July. This move could, first of all, boost European car makers' prospects in their home market, but also raise the risk of a retaliatory trade war-like scenario. The threat of tariffs, even if they do not materialize, could dampen investment, as we learned from the US-China trade war. While Chinese retaliation is likely to hit mainly small and symbolic industries, fears of retaliation, together with energy uncertainties and a possible weakening of global demand, would be an additional risk to the recovery for eurozone industries.
Despite many risks, there are signs of a gradual cyclical improvement in the sector. New orders have been bottoming out for some time and production has not fallen as sharply as it did at the end of 2023. Actual production has also been bottoming out in recent months. Eurozone consumers have improved purchasing power and lower interest rates could have a positive impact on investment, allowing the industry to recover in a volatile period.
Read the original analysis: Eurozone industry slumps as tariff fears loom
