Eurozone manufacturing numbers plunged in July to their lowest level in three years, according to newly-released macroeconomic data.
A fall of 1.5% in industrial output was reported across the 17-country Eurozone, instead of the 0.1% increase forecast by economists. The drop, reported by European Union statistics agency Eurostat, raises serious questions about whether European leaders can sustain a promising, but still uncertain, economic recovery.
Germany, the EU’s largest economy and a perennial manufacturing powerhouse, posted a drop of 2.3% from June to July, and France, Italy, Portugal, the Netherlands, and Ireland also posted disappointing results. Low production in Germany, France, and Italy was primarily responsible for the Union-wide dip.
While most of European manufacturing had a poor summer, Finland and Spain both saw their industrial output rise modestly.
Eurostat’s report casts a bearish shadow over optimism that Europe had finally emerged from an 18-month recession. The news out of Germany is particularly worrisome, given that the Federal Republic has long been a bulwark of stability and productivity in the often-shaky currency bloc.
The EU is in dire need of money to pay off its debts, which have risen shockingly since the global financial crisis. The International Monetary Fund (IMF) has estimated that the EU’s gross public debt will hit 95% of GDP by the end of the 2013 fiscal year, up from only 70% in 2008. Countries like Greece and Portugal in particular have found themselves strapped for cash of late.
Olaf Wortmann of the German engineering federation VDMA told The Wall Street Journal that German firms remain reluctant to invest until they see more solid proof of the Eurozone’s recovery, while European Central Bank President Mario Draghi warned investors not to expect an imminent return to pre-crisis prosperity.
“I am very, very cautious about the recovery. I cannot share any enthusiasm,” Draghi told reporters.
Draghi continued with a warning that, while the worst may be over for Europe, the ECB still expects a contraction of 0.4% by the end of the year.
Reuters, too, has warned Europe not to uncork the champagne just yet. The global news giant says that it expects Eurozone GDP to rise by no more than 0.2 to 0.4% each quarter until early 2015.