Manufacturing continues to be the Achilles heel of the euro area economy. Production has been contracting for some time now, and the slight increase in production in February is not significantly different from recent trends. Thanks to the sharp decline in production in January, production for the entire first quarter is likely to decline again compared to the fourth quarter of last year.
February's improvement was relatively broad-based. Energy production fell by 3%, with non-durable consumer goods making a slight negative contribution. Overall output increased due to increased production of capital goods, intermediate goods, and durable goods.
All large industrial economies have seen production improve, with Germany and Spain now reporting increases for the second month in a row. France, Italy, and the Netherlands all experienced large declines in January, but only large increases in February, which did not offset the earlier declines.
There are signs of improvement here and there, but the impact on production is likely to be delayed rather than immediate. New orders for eurozone industry remain weak, but not as low as they were a few months ago. The survey shows some improvement in production expectations and overall sentiment, but the second quarter may be too early for a meaningful recovery.
