Eurozone industrial activity falls in July, but growth outlook remains solid

Official figures show that industrial production across the 19-country eurozone fell sharply during July, the latest signal that economic growth across the bloc faltered at the start of the third quarter.

Eurostat said Wednesday that industrial production, which includes everything from manufactured goods to mineral extraction, declined by a monthly rate of 0.8% in July. That was double the anticipated decline in financial markets and suggests that the eurozone economy has started the third quarter on a subdued note.

Moritz Degler, an economist at Oxford Economics, said trade war fears have taken their toll on the eurozone’s export-reliant industrial sector. Still, with the domestic economy “in solid shape,” Degler said eurozone growth in the third quarter will remain stable at a quarterly rate of 0.4%.

An RBC outlook report forecasts modest eurozone growth of 2.1% for 2018 and 1.8% for 2019. The report adds, however, that the region will likely expand close to its potential rate—as will Canada.

For Canada, RBC forecasts a growth rate of 2.1% for 2018 and 2.0% for 2019. For the U.S., those numbers are 2.8% and 2.4%, respectively.

Despite the headwinds of trade, as well as more market turbulence, the global economy is expected to post a “strong” gain of 3.9% this year and avoid “a significant” downturn in 2019, says the report.

“Monetary policy stimulus remains, and some countries have opened the spigot on the fiscal front,” it says. “The U.S. tax cuts and large infrastructure bill will keep the economy on a firm growth path for the remainder of 2018.”

In 2019, Fed rate hikes will likely slow global growth “modestly,” it says.

For more economic details and for charts listing financial market forecasts, read the full RBC outlook report.

Staff, with files from The Associated Press

The Associated Press is an American not-for-profit news agency headquartered in New York City.