16 May 2023
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Eurozone industrial production slumps in March

By Edward Bell

Eurozone industrial production slumped in March, falling 4.1% m/m. The move was significantly worse than expectations for a 2.8% fall and amounts to the series’ biggest move since April 2020. On a country basis the largest declines were seen in Ireland and Germany, with the drop off concentrated in capital goods.

The European Commission has raised its outlook for both Eurozone inflation and economic growth in 2023 and 2024. The Commission cited “persistent challenges” with regards to inflation, leading them to revise their forecasts for CPI up to 5.8% in 2023 from an earlier estimate of 5.6%, and 2.8% in 2024 from 2.5%. Forecasts of core inflation have also been revised upward and are now expected to be higher than the headline measure both this year and next. There were also marginal increases in the commission’s GDP forecasts which are for growth of 1.1% in 2023 and 1.6% in 2024.

Economic data came in below forecast in China for April, adding to evidence that the rebound in economic activity has not been as quick as had been expected. Industrial production rose just 5.6% y/y last month, almost have the consensus forecast for 10.9% growth. Retail sales have accelerated to 18.4% y/y from 10.6% in March, but were also below expectations. Fixed asset investment slowed to 4.7% y/y the first four months of the year, down from 5.1% in Q1. However the unemployment rate did decline to 5.2% from 5.3% in March.  

The New York Empire manufacturing survey surprised on the downside in May, recording the biggest fall since the start of the Covid pandemic. The general business conditions index fell below the neutral zero mark, to reach a value of -31.8, on the back of sizeable falls in both orders and shipments. The outlook for 6-month ahead business conditions was however more optimistic, with that sub-component climbing to a 3-month high.

Consumer price inflation in Saudi Arabia reached 2.7% y/y in April, having risen by the same amount the month prior. On a monthly basis CPI rose 0.4% in April. The headline price rises were predominantly driven by a 8.1% y/y jump in the housing, water, electricity, gas and other fuels subcomponent, which in turn was a function of significantly higher rental costs. 

Turkey’s supreme election council have announced that the country’s election will go to a second round on 28 May, with neither candidate having managed to secure an outright majority in Sunday’s first round of voting.

Today’s Economic Data and Events

  • 10:00 UK unemployment rate (Mar) Forecast: 3.8% 3mth rolling ave
  • 13:00 GE ZEW Survey (May)
  • 13:00 EC GDP (Q1) Forecast: 0.1% q/q
  • 16:30 US retail sales (Apr) Forecast: 0.8% m/m
  • 17:15 US Industrial Production (Apr) Forecast: 0.0% m/m

Fixed Income

  • US Treasuries drifted lower overnight, moving on still hawkish messaging coming from Fed officials. Neel Kaskhari of the Minneapolis Fed said that the Fed has “more work to do” to get inflation lower while his counterpart from the Chicago Fed, Austan Goolsbee, leant toward the Fed being ready to pause from hereon out. Yields on the 2yr UST closed higher by 2bps to 4.0104% while the 10yr yield added about 4bps to 3.5019%.
  • Bond markets in Europe were broadly weaker at the start of the week with bund yields up 3bps at 2.304% while gilt yield added 4bps to 3.811%.
  • Turkey’s Eurobonds softened on the results of the presidential and parliamentary election with the market now having to sit through a period of uncertainty ahead of second round presidential elections.
  • Saudi Arabia is pricing a USD benchmark sukuk for a 6yr maturity at +80 while a 10yr tranche is pricing at +100.
  • Moody’s upgraded their sovereign rating on Oman to ‘Ba2’, still below investment grade but with a positive outlook.


  • The week started on a broadly weaker USD footing, even as yields pushed slightly higher. A broad move higher in equities helped to lift risk appetite. EURUSD added 0.2% to 1.0874, recovering some of the prior sessions’ heavy losses, while GBPUSD added almost 0.6% to 1.2529. USDJPY added 0.3% to 136.12.
  • Commodity currencies also had a robust showing with USDCAD down 0.6% at 1.3467 while AUDUSD added 0.8% to 0.67 while NZDUSD rose by 0.8% to 0.6242.


  • There were gains across the major US equity indices on Monday, with technology stocks faring better than general indices. The tech-heavy NASDAQ rose 0.7% over the course of the day, while the S&P 500 and Dow Jones rose 0.3% and 0.1%, respectively.
  • European markets were largely flat on Monday with the Eurostoxx 50 index falling 0.03%, the CAC rising 0.1%, the DAX up 0.02%, and the FTSE 100 up 0.3%.
  • Locally, the DFM lost 0.95% while the Tadawul was 1% lower


  • Oil moved higher at the start of the week with Brent futures closing at USD 75.23/b, up 1.4%, while WTI added 1.5% to USD 71.11/b. Supply issues around fires in major producing regions of Canada as well as interrupted flows on the pipeline linking Iraq and Turkey are still acting as near-term supports for oil.
  • The US government is also now looking to start to refill the strategic petroleum reserve, which it drew down heavily last year. The deals will be announced next month with the flows to begin in August.

Written By

Edward Bell Head of Market Economics

Jeanne Walters Senior Economist

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