In November, industrial production fell short of projections, recording a month-on-month (m/m) decrease of -0.6% and a y/y contraction of -4.4%, compared to Erste’s forecast of +0.6% m/m and -3.1% y/y. The National Institute of Statistics revised the previous month’s data downward to -5.1% y/y from -4.9% y/y.
Despite these challenges, Erste Group estimates a recovery in industrial production growth to +2.0% in 2024, a notable improvement from the -4.7% expected in 2023. The positive outlook is attributed to slightly higher Eurozone economic growth, robust domestic consumption fueled by rising real incomes, and anticipated growth in EU-funded investments supporting domestically produced goods.
Breaking down the components of industrial production, manufacturing experienced a -1.0% m/m and -5.0% y/y decline, while mining saw a +0.7% m/m increase but a -1.8% y/y fall. Energy production performed well in monthly terms with a +2.2% m/m increase but declined by -2.0% y/y.
Local manufacturing confidence showed a slight dip in December, dropping to -0.3 from 0.0 in November. This decline was driven by worsening expectations for business production, as the order book level remained flat compared to the previous month, and inventories were slightly lower.
External confidence indicators, particularly for the end of 2023, were relatively weak. The Ifo Business Climate Index for the German economy decreased in December, while the HCOB Eurozone Manufacturing PMI rose marginally but remained within the contractionary territory. Despite these challenges, Erste Group believes that the future recovery of local manufacturing appears subdued, acknowledging that the industry likely reached its trough in May of the previous year at -5.8% y/y.
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