Eurozone industrial outlook clouded as energy risks return

The outlook for the eurozone industry has become increasingly uncertain amid falling production in January and rising energy prices linked to the Middle East conflict.

BRUSSELS, March 13 (Xinhua) -- The outlook for the eurozone industry has become increasingly uncertain as production fell in January and rising energy prices linked to the Middle East conflict threaten to derail the eurozone's fragile manufacturing recovery, according to an analysis by Dutch-based multinational financial institution ING on Friday.

Eurozone industrial production dropped 1.5 percent month-on-month in January, following a decline of 0.6 percent in December. The January reading marked the lowest level of industrial output since December 2024, indicating that recent optimism among manufacturers has not yet been reflected in actual production data, according to the analysis.

The sharp fall in Irish industrial production contributed significantly to the January decline. However, the slowdown was not limited to Ireland. Germany, Italy, and Spain also reported lower production compared with December, the analysis noted.

Although industrial activity remained above 2024 levels for much of last year, the latest data suggest that the sector is losing momentum.

The ongoing conflict in the Middle East has added a new layer of uncertainty. Higher energy prices and broader supply-chain disruptions are now posing fresh risks to industrial production, especially for energy-intensive sectors, the analysis showed.

ING Chief Economist Bert Colijn warned that a prolonged surge in energy prices could undermine recovery prospects for energy-intensive industries, which have already struggled since the energy price shock of 2021-2022.

While some sectors have managed to perform relatively well despite previous energy shocks, higher energy costs could still weigh heavily on manufacturing and dampen hopes for a broader recovery, he said.

Just as confidence has begun to return to the manufacturing sector, geopolitical tensions are once again introducing significant downside risks for the eurozone's industrial outlook, Colijn said.  ■