In August, both Italian and French industrial production rose sharply, while the consensus was looking for a decline. In France, industrial production rose by 1.5% M/M, while a decline by 0.3% M/M was forecast and also the previous figure was upwardly revised, from 0.2% M/M to 0.6% M/M. The sector breakdown shows that strength was led by the automobile industry (9.9% M/M) and by transport material (6.5% M/M). In August, French car manufacturers are often (partly) closed or limiting production, which suggests that some of the strength might be related to seasonal factors.
Another explanation might be that manufacturers decided to increase inventories ahead of expected actions from trade unions. Nevertheless, for now, French industrial production remains surprisingly robust, rising for a third straight month in August, but confidence indicators suggest that the worst in France has yet to come. In Italy too, industrial production proved remarkably strong in August. Production rose by 1.7% M/M, while a decline by 0.5% M/M was forecast. The July outcome was marginally upwardly revised, from -0.2% M/M to -0.1% M/M. In Italy, strength was broad-based, but also led by transportation vehicles (10.7% M/M). The statistics bureau cautioned that seasonal factors may have distorted the data as output data in Italy can be highly erratic in August because many factories are closed for the summer break. Nonetheless, the underlying picture is strong too, suggesting that it was not all due to the seasonals. Earlier, the German production data showed a limited decline in production, which was partly due to construction. For the euro zone data on Friday, the consensus is looking for a decline by 0.4% M/M, but the French and Italian data suggest that an upward surprise is not exclude.