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The Eurozone industry shrinks faster in December than expected

The euro zone's industrial production declined more than expected in the month of December, showing that the two-year slump is still far from over, even though some figures on sentiment and orders have indicated a bottoming out.

Eurostat data showed that the output of the 20 countries sharing the euro fell by 1.1% from December to the previous month. This was below expectations of a 0.6% decline, as Germany, the industrial powerhouse, shrank by 2,9%, and Italy by 3,1%.

The industry has been a drag for Europe since years, as high energy prices, weak Chinese demand, increased global competition and old-fashioned car models are all factors that have a negative impact on orders.

The production of capital goods dropped by 8.0%, which was a huge drop compared to the previous year.

Even though some indicators point to a stabilisation of the industry, the new U.S. steel and aluminum tariffs, compounded with the threat of additional trade barriers are likely to have a negative impact on the sector.

Some economists worry that tariffs on China will also be a drag for Europe because Chinese products are likely to search out new markets, and may crowd out local items.

Comparing November to December, the output of capital goods fell by 2.6%, while that of intermediate goods was down by 1.9%. This decline in output has been partially offset by an increase in output for consumer goods.

The growth of the euro zone has stagnated for most of the last year, as consumers save their surplus cash. This is partly due to the worrying news about the health of the industry, which is a major employer.

(source: Reuters)