Eurozone faces downturn after factory output dives in March

EUROZONE factories are facing a recession after surging costs and a shortage of key supplies sent output plunging in March.

The 1.8pc fall in industrial production is the sharpest monthly drop since the first lockdown in 2020, and takes output back down to pre-covid levels.

Eurostat data indicates production in the month was down 0.6pc compared with February 2020.

Germany led the crunch among the big economies with output down 5pc on the month.

It means the Continent’s largest economy’s industrial output is close to one tenth below its pre-covid level. Output also dipped 1.8pc in Spain and 0.5pc in France, as well as stagnating in Italy.

The falls were widespread across most types of industry, with energy output down 1.7pc and capital goods – such as the machinery in which swathes of German factories specialise – down 2pc.

Michael Tran, at Capital Economics, said the Continent faces a full-blown industrial recession given the fallout from the Russian invasion of Ukraine.

“With further Russian energy import bans looming and supply shortages remaining acute, we think this is the start of a manufacturing recession which will cause GDP to stagnate,” he said. “The European Commission survey for April showed that over half of manufacturing firms were experiencing shortages in equipment.”

Samuel Tombs, at Pantheon Macroeconomics, pointed to the “whopping 14.6pc month-on-month drop in motor vehicles output” as a key crunch point in manufacturing in the eurozone.

He added: “Survey data suggest industrial output will fall again in April.”