Impact of Covid-19 crisis on industrial production


Data from October 2020

Planned update of the article: November 2020

Highlights


Industrial production in the EU increased by 1.0 % in August 2020 after increases of 4.9 % in July, 9.6% in June and 11.6 % in May. In April and March production decreased by 18.2 % and 10.7 %; the total reduction since February 2020 still amounts to 5.3 %.

In August 2020 compared with the previous month, industrial production grew in a large majority of EU countries, with the largest increases in Portugal (10.0 %) and Italy (7.7 %).

EU-27, development of industrial production, January to August 2020, monthly data, seasonally and calendar adjusted (2015=100) - Source: Eurostat (sts_inpr_m)

This article is part of an online publication presenting the development of short-term business statistics (STS) indicators in the Covid-19 crisis. Results have already been published for the development of the retail trade volume indicator. In this article Eurostat presents the recent development of industrial production. Information on construction and services will be updated as soon as they become available; for the dates of publication see the STS release calendar.

Please also see the monthly Eurostat News Release 14 October 2020.


Full article

Covid-19 containment measures in Europe

Covid-19 infections have been diagnosed in all European Union Member States. To fight the pandemic, EU Member States have taken a wide variety of measures, including restrictions on travel into the EU and between EU Member States, cancellation of public events, restrictions on private gatherings, closing of schools, bars, restaurants, hotels and many shops. In Italy and Spain, non-essential production was stopped but the imposed measures in general had a negative effect on demand and thus on production in many areas. The large majority of the prevention measures were taken during mid-March. Most of the prevention measures and restrictions were kept for the whole of April. In May, several of the measures were abandoned, or at least reduced in scope and severity, which had a strong effect on industrial production. This recovery effect continued in June. In July and August industrial production increased further albeit at a somewhat lower tempo.

Development of industrial production in 2020

In August 2020, industrial production in the EU-27 increased by 1.0 % compared with the previous month. In July, June, and May, industrial production had already increased by 4.9  %, 9.6 % and by 11.6 % respectively, after severe decreases in April (‑18.2 %) and March (-10.7 %). The total loss of industrial production between February and April amounted to 27.0 %. Since April, industrial production has increased by 29.6 %. In the euro-area, the August industrial production increased by 0.7 % compared with July.

Figure 1 shows the 2020 development in industrial production for total industry and the various main industrial groupings, i.e. intermediate goods, capital goods, energy, durable and non-durable consumer goods.

Figure 1: EU-27, development of industrial production, January to August 2020, monthly data, seasonally and calendar adjusted (2015=100) - Source: Eurostat (sts_inpr_m)

In the EU-27, the industrial production of durable consumer goods (e.g. furniture) showed the strongest increases in May (47.4 %) , June (22.3 %), July (6.1 %), and August (5.7 %), which corresponds to strong drops in April and March (-31.2 % and -25.4 % respectively). The production level for these goods is at 103.8 % of the February level. Durable consumer goods are the only product category for which the production level is now higher than before the outbreak of the crisis. The increase in intermediate goods was 2.9 % in August, the production of energy increased by 1.6 %. After three months of relatively strong recovery, the production of capital goods decreased by 1.1 % in August, the production of non-durable consumer goods decreased by 0.6 %. In total, industrial production reached a level of 94.7 % of the pre-crisis activities.

For comparison, Figure 2 shows how the various industrial groupings developed on average during the years 2010 – 2019 (to make the various index levels comparable, all years have been re-referenced to an average of 100). With the exception of energy production, all MIGs see an increase between January and May and some decline in June due to the beginning of the summer holidays, the months with the strongest growth usually being March and May. During the rest of the year the production levels remain relatively stable. As can be seen, the average changes in the index value are clearly below one point.

Figure 2: EU-27, average monthly development of industrial production, 2010 - 2019, monthly data, seasonally adjusted (2015=100).
Source: Eurostat (sts_inpr_m)

Comparison with 2008

The global financial crisis in 2008 had quite strong effects on the production in industry and construction (for a detailed analysis of the 2008 crisis on STS indicators see here).

Within only one year, between April 2008 and April 2009, the production of intermediate goods fell by almost 31 index points, the production of capital goods fell by almost 28 index points and the production of durable consumer goods by around one quarter. Energy production declined by around 16 index points and the production of non-durable consumer goods (including e.g. food and drinks) dropped by around 4 index points. In total, industrial production was reduced by more than 22 index points in these 12 months.

In comparison with the global financial crisis, the Covid-19 crisis affected the various industry groups in a much more drastic and severe way: within only two months, between February and April 2020, the index for total industrial production dropped by 28 points, the index for durable consumer goods was halved, the index for capital goods dropped by more than 40 points. Despite the partial recovery since, these losses have not been recovered for most industries (with the exception of durable consumer goods).

The recent declines are by far the largest monthly falls recorded since the start of the series, significantly higher than the losses seen in late 2008 and early 2009 months, during the financial crisis. Overall, industrial production in the euro area and EU fell in April 2020 to a level that it had already reached in the 1990s.

Figure 3: EU-27, development of industrial production during the global financial crisis 2008-2009, monthly data, seasonally adjusted (2015=100).
Source: Eurostat (sts_inpr_m)

Development by industry

Figure 4 provides a more detailed overview of the various industries since March 2020. The industries with the highest declines in production in March and April were the manufacturing of motor vehicles, leather products, wearing apparel, textiles and furniture. These industries also saw exceptionally high growth rates, which is due to the extremely low levels that the production of these products had reached in April 2020 (base effect).

Figure 4: EU-27, growth rates for different industries – March, April, May, June, July, and August 2020, monthly data, seasonally adjusted (2015=100).
Source: Eurostat (sts_inpr_m)

Figure 5 provides an overview of the development of the various industries from February to August 2020. During the first two months of this period, i.e. in March and April, the losses had been dramatic in some industries (e.g. around 80 % for motor vehicles, and leather products). Only very few industries (e.g. pharmaceutical products and tobacco products) had recorded positive growth rates. Total industrial production had decreased by around one quarter. As a result of the generally positive growth between May and August, these losses have been recovered to some degree. In total, the August industrial production of the EU reached 94.7 % of the February level.

Figure 5: EU-27, growth rates for different industries – August compared with February 2020, monthly data, seasonally adjusted (2015=100).
Source: Eurostat (sts_inpr_m)

Development by country

Since the Covid-19 containment measures differed between countries as to timing and strictness, it was to be expected that the effects on industrial production would also vary. Table 1 shows the rates of change between February and April (peak of the crisis), April and August (recovery) and the recent rate for August 2020. During the peak months of the crisis, Italy, Slovakia and Hungary experienced extremely high negative rates of change. These countries also showed high rates during the recovery months since May July.

Table 1: Industrial production growth rates for total industry 2020, monthly data, seasonally adjusted.
Source: Eurostat (sts_inpr_m)


The recent growth has, however, generally not been sufficient to recover the losses during the most acute phase of the Covid-19 crisis. Table 2 shows the degree of recovery for the EU-27 countries and the various main industrial groupings (MIGs). The general recovery level is 94.7 % for the EU-27 and 94.3 % for the euro area. Only three countries (Lithuania, Italy, and Portugal) have regained and surpassed the pre-crisis production level, all others still have some way to go, especially Germany (88.4 %) and Estonia (90.0 %). Table 2 also shows that the recovery has been relatively strong for durable consumer goods (103.8 ) and energy production (99.2 %) but is still low for capital goods (91.5 %).

Table 2: Industrial production, share of August production in % of February production (2020), monthly data, seasonally adjusted.
Source: Eurostat (sts_inpr_m)



Data sources

The latest results for the development of industrial production are published in monthly news releases by Eurostat.

According to the STS-Regulation the industrial production index is published only 45 days after its reference months. At this early stage it is normal that no complete coverage of data can be ensured by National Statistical Institutes and that data have to be estimated to some degree. As a consequence, revisions occur during the publications that follow.

The Covid-19 crisis posed additional problems for data collections, since, for example, closed shops and production sites could not be reached or did not supply any data. Moreover, it was not clear if missing data might not be due to businesses being permanently closed. As a consequence, it may be expected that revisions of the first data could be subject to greater revisions than is usually the case.

The data in this article are, for several Member States, based on fewer statistical observations than usual or alternative sources. For missing data, imputation and estimation methods were applied. Information on the compilation of short-term business statistics during the Covid-19 crisis can be found here and (specifically for STS) here.

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