The euro area began the second half of the year with a monthly slump in industrial production, adding to signs that manufacturing will keep weighing on economic growth.
Output fell 1.1% in July, exceeding the 0.9% drop that forecasters had estimated in a Bloomberg survey. The drop from a month earlier erased all gains made throughout the second quarter.
The data, which follow national reports showing production fell in Germany and Italy while it increased in France and Spain, put the onus on services such as tourism to have buoyed economic growth in the euro area during the summer months.
Without that fillip, more factory weakness might raise the prospect of the region as a whole suffering another contraction. That would be in line with the drop in overall output that economists now anticipate for Germany, Europe’s biggest economy.
Forecasters currently predict euro-zone growth of 0.1% in the three months through September, but several analysts polled by Bloomberg see gross domestic product shrinking.
The industrial report out on Wednesday is one of the final pieces of data that European Central Bank officials will see as they determine whether the strength of consumer prices is such to warrant another interest-rate hike, or to pause tightening to avoid further damage to growth.
Policymakers predicted expansion of 0.9% this year in their last forecasts in June. They will release new projections on Thursday, which are also seen showing inflation above 3% in 2024, according to a person familiar with the matter.
Germany is proving a particular weak spot, enfeebled by lower demand from China and a lingering energy crisis. The European Commission this week said it will be only large nation to suffer a downturn this year while concerns about the longer-term outlook for the country are intensifying.
Business surveys by S&P Global for August signaled that services in the wider region — which had been more resilient than manufacturing in recent months — are starting to follow struggling factories into a downturn.
--With assistance from Barbara Sladkowska and Joel Rinneby.