Lea Jakobiak
On the eve of a keynote speech by the ECB President, Mario Draghi, one leading economist doesn't hold back in the way he believes the Bank has dealt with the eurozone's faltering recovery.
Article / 10 February 2014 at 6:42 GMT

3 Numbers to Watch: French & Italian industrial output, EU Sentix

James Picerno James Picerno
editor/analyst /
United States

• French industrial output hopes to emulate November success
• Italy divided as debate focuses on if it has "turned a corner"
• Sentix sentiment in Eurozone looks for boost in latest report

Monday’s a light day for economic reports, but several numbers scheduled for release will update the macro profile for the Eurozone: industrial production figures for France and Italy, followed by a fresh read on investor sentiment, according to new survey data from Sentix. When the statistical dust clears, we’ll have a clearer sense of how Europe's prospects for recovery are evolving.

France Industrial Production (07:45 GMT) The risk of deflation in Europe looks compelling to a number of veteran observers of the macro scene, but the threat hasn’t convinced the central bank to change its game plan. After last Thursday’s monetary announcement, which left interest rates unchanged and monetary policy as is, European Central Bank President Mario Draghi downplayed the notion that lower inflation is a fundamental problem for the Eurozone. Speaking to reporters, he blamed “much of the decline” in inflation on Spain, Ireland, Portugal and Greece and said that the general disinflation trend is primarily only a “relative price adjustment” rather than hard evidence that deflation risk is rising. “The reason for today’s decision not to act,” he added, “is really to do with the complexity of the situation that I have just described, and the need to acquire more information.” Is that the informed view of sober analysis? Perhaps, although it looks like a “dangerous game of chicken,” according to The Telegraph's Ambrose Evans-Pritchard.

Deciding if Draghi is losing this game will take time, starting with today’s update on industrial production for France. If deflation is (or isn’t) a creeping risk, we may see the evidence in the latest estimate of industrial activity. Based on the previous report, this corner of the economy perked up in November.


French industrial production perked up in November, but with the spectre of disinflation stalking the Eurozone, will December be as good? Photo: Thinkstock

Industrial output increased a better-than-expected 1.3 percent over October’s level and advanced 1.5 percent from a year ago (based on seasonally and working-day adjusted data). Overall, November was the best month for the industrial sector in recent history. Is this a sign that Draghi’s relatively optimistic analysis is more than wishful thinking? Hold that thought as we await the December update.


Italy Industrial Production (09:00 GMT) By the diminished standards of Italy’s economy, November was a decent month for industrial activity in Europe’s third-largest economy, as it was in France. Output increased 0.3 percent vs. October, delivering the third straight month of growth. Meanwhile, the year-over-year comparison registered a rare increase, rising 1.4 percent in November vs. the same month a year earlier. It’s still premature to see this as something more than noise, although another upbeat report for December will inspire the optimists to see a slightly brighter light at the end of Italy’s tunnel… again.

Assuming, of course, there are any optimists left when it comes to considering Italy’s outlook. Patience is wearing thin with the status quo. The country’s influential business lobby, Confindustria, last week charged that Italy’s prime minister (Enrico Letta) and his government with not doing enough to support the cause of promoting growth, such as cutting labour taxes. Letta fired back and called the lobby’s president, Giorgio Squinizi, a “doom-monger.” Returning the verbal volley, Squinizi responded: “Rather than being a doom-monger, I would say I am a realist,” according to Reuters.

The public spat is, in part, a debate about expectations. The government predicts Italy’s GDP will grow 1.1 percent in 2014, or nearly twice as fast as Confindustria’s projection and forecasts from other groups as well. The IMF’s current World Economic Outlook, for instance, sees GDP rising by a thin 0.5 percent this year.

Is the crowd overly pessimistic on Italy’s prospects for recovery in 2014? Answering “yes” implies that today’s industrial production data will show that last year ended on a modestly upbeat note.


Eurozone Sentix Investor Sentiment (09:30 GMT) Europe may be facing deflation, but inflation describes the state of sentiment for the investment class on the near-term economic outlook for the Continent. Is this a case of denial or a healthy contrarian discipline that will reap rewards down the road? Only time will tell, but there’s no denying the view from the market trenches that the future will compare favourably with the recent past. That, at least, is the message in several sentiment benchmarks, including the Sentix Investor Confidence Index for the Eurozone.

In the last monthly report, this benchmark jumped to 11.9, the highest since April 2011. The increase inspired an analyst at Sentix to write that “the Eurozone leaves its crisis behind.” Really? It’s easy to find economists who disagree. Yet improving market sentiment continues to suggest that the crowd sees the healing progress rolling forward. Is the optimism for looking ahead warranted? Yes, according to recent first-quarter GDP estimates for the Eurozone via The projected growth is still weak, but the revised predictions are at least moving higher lately. The question is whether investors remain upbeat? Today’s Sentix report will have the answer.



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