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World industrial production stagnated in July: CPB

World industrial production stagnated in July, posting 0% growth month-on-month, reported the Netherlands Bureau for Economic Policy Analysis (CPB).

After falling 1.3% in May, this same indicator recovered with a growth of 1.2% in June 2021.

The Industrial Production Monitor covers 85 countries around the world and these countries account for about 97% of the global industrial production.

In particular, the European Central Bank (ECB) projects the US economy to grow amid strong political support and the gradual dissipation of supply constraints, although the recent surge in Covid-19 infections undermines prospects. .

There, economic activity continued to expand in the second quarter of 2021, at an annualized rate of 6.5% (after 6.4% in the first quarter).

This was lower than expected in the June 2021 Eurosystem experts’ macroeconomic projections, reflecting weaker-than-expected public spending and a negative contribution from changes in inventories.

The growth was driven by consumer spending, reflecting the income support provided earlier in the year and a rapid relaxation of restrictions related to the pandemic.

Investment remained strong. A recent increase in unserved orders in certain industries, such as vehicle manufacturing, reflects supply constraints.

Industrial production

At the same time, according to the ECB, negotiations continue in Congress on the two fiscal plans that had been incorporated into the June projections, which introduces some uncertainty about the outlook.

While strong political support and the alleged gradual dissipation of supply restrictions are anticipated to drive growth in the medium term, short-term prospects are clouded by the sharp increase in the number of Covid-19 infections due to the most virulent Delta variant, particularly in states with low vaccination rates.

As a result, consumers, who have driven the recovery so far, appear to have become more cautious: Personal consumption spending decreased 0.1% in July, while the personal savings rate increased.

Also, job growth in July was lower than expected, particularly in high-contact industries such as leisure and hospitality.

Asia and Europe

In China, growth momentum faces short-term temporary headwinds, but economic activity is expected to grow at a solid pace over the medium term.

The adoption of stricter containment measures due to the increase in Covid-19 cases, severe flooding and some supply disruptions point to a slowdown in the third quarter.

Likewise, industrial production, retail sales and investment were below expectations in July, although they continue to grow.

The manufacturing PMI fell to 49.2 in August, the first time it was in contraction territory since April 2020, making this sector more likely to slow in the third quarter.

Finally, the recovery of activity in the Euro Area is increasingly advanced. Real GDP recovered in the second quarter of 2021, but is still around 2.5% below its pre-pandemic level in the fourth quarter of 2019.

Value added was mainly supported by a rebound in services, while industry and construction contributed only marginally.

 

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