Summary:
- Italy showed disappointing industrial production data for April with widespread declines across various industries
- UK manufacturing and construction output slumped
- GBP extends losses, European equities keep rising
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Open account Try demo Download mobile app Download mobile appData regarding industrial production in Italy and the UK for April came in far below expectations, defying market observers’ anticipation of a recovery. Let’s begin with Italian output showing a 0.7% MoM decline (SA, WDA) and being weaker compared to the flat reading expected. Looking at the details one may notice that declines in April were widespread and affected almost all industries except food and tobacco, coke and refined oil (small increases of 0.1%), pharmaceutical (+6.9%) and computer and electronic (+0.7%). The reading appears to be in line with what we saw on Friday from Germany where industrial output slumped in April the most since 2015. Having known data from Germany, France, Spain and Italy one may expect another gloomy reading from the Eurozone (due on Thursday). However, even as the data from Italy looks and actually is disappointing, the numbers from recent months were still above a seasonal pattern (the median from the past 10 years).
The Italian FTSE MIB (ITA40) has not been particularly impressed with industrial production. Although it keeps trading somewhat above its flat line, technically bulls could suppose a retreat toward 20100 points. Source: xStation5
Ugly manufacturing production from UK
From the UK we also were offered the very weak report on industrial and construction output. In April, industrial production contracted 2.7% in monthly terms, manufacturing production declined as much as 3.9% while construction output fell 0.4%. It is worth noting that the decline in production in UK factories turned out to be the largest since 2012 mainly due to the fact that a boost from stockpiling evaporated. Do notice that production increased over the first three months as UK firms decided to boost their stock levels in anticipation of Brexit scheduled initially on March 31. Other data from the UK showed monthly GDP declining 0.4% in April after falling 0.1%. In turn, looking at the 3m/3m dynamic we got a deceleration to 0.3% from 0.5%. Apart from this, the trade deficit for April totalled 2.74 billion GBP, above the median estimate of a 4.7 billion GBP deficit. Following a set of data we mentioned above the GBPUSD has extended its losses and it is trading below a 1.27 handle at the time of writing.
UK industrial production contracted in April the most since 2012 as the boost from stockpiling evaporated. Source: Bloomberg
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