Eurozone industrial production recovered strongly in July after two months of contraction. As the seasonal adjustment flatters the summer months, it is too soon to dismiss the negative growth impact of supply chain problems. Meanwhile, the drop in labour costs is a statistical quirk.
We have to wait until September to know the extent to which supply chains have normalised and production can pick up more structurally, but recent reports are still qualified in that regard. Don’t get us wrong, the July figures are certainly good and courtesy of the recovery in the services sector, GDP growth is likely to hover around 2% quarter-on-quarter in 3Q, but we anticipate slower growth from 4Q onwards.