Europe’s April chemicals output slows ahead of wider industrial production trend
LONDON (ICIS)–Chemicals production continued to slow in April, according to the latest data released by the EU’s statistical agency Eurostat on Wednesday.
Deteriorating demand contrasts with previous expectations held by chemicals markets at the start of 2023 when a healthy second quarter was tipped to follow a slow start to the year.
The data in the chart shows the change compared to the previous month
As output from the chemicals sector is widely used as a raw material in manufacturing markets, any downturn could be taken as a leading indicator for what is likely to happen in the sector in the coming months.
Overall industrial production increased by 1% in the eurozone and by 0.7% in the wider EU in April compared to March.
For both regions, this was driven by production of capital goods – up 14.7% in the eurozone and up 12.1% in the EU on the previous month.
Energy bucked the trend of declines, with increases of 1% in the EU and 0.3% in the EU, as prices stabilised in the wake of dramatic peaks and decreases in the wake of the Russian invasion of Ukraine.
The remaining segments – intermediate goods, durable consumer goods and non-durable consumer goods – all tracked declines for both regions ranging from 1-3%.
Production in the chemicals sector dropped more significantly compared to a year prior, but the rate of contraction largely slowed across key producing countries, when spiking gas prices and threats of energy security stifled output.
The data in the chart shows the change compared to the previous year
In contrast, industrial production ticked up 0.2% in the eurozone and by 0.1% in the EU compared to April 2022.
The strongest drivers on an annual basis were capital goods, rising by 8.3% and 8.8% in the eurozone and EU respectively, supported by more modest growth in non-durable consumer goods (up 0.6% and 1.8%).
Energy was the biggest detractor for annual industrial production, falling 7.4% in the eurozone and 8.3% in the EU.
Further losses were recorded for durable consumer goods (down 4.6% in the eurozone and 6.1% in the EU) and intermediate goods (down 6.2% and 6.6% respectively.
Analysts at Oxford Economics stated that the outlook for industrial production in the eurozone was “far less flattering” than the headline figure suggests due to significant gains in Ireland. Only France posting expansion of the single-currency bloc’s key economies.
“The positive start to 2023 thanks to a relatively mild winter lowering energy prices has ended. Orders, both new and backlogs, are decreasing, and the bulk of the boost from easing supply bottlenecks has already materialised,” said Oxford Economics.
“While falling energy inflation is providing some relief, many firms are still stuck with high prices. We think that eurozone industry will contract again in Q2.
“Amid weak domestic demand, industry will likely contract over 2023 as a whole as well. But there is upside risk after inflation finally surprised to the downside in May, which could herald a faster disinflationary process than firms expect and support demand.”
Front page picture shows BASF’s flagship chemical production site in Ludwigshafen, Germany (image credit: Firn/imageBROKER/Shutterstock)
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