07:50 AM EDT, 08/14/2025 (MT Newswires) -- Thursday's macro data for the eurozone provides both a look in the rear-view mirror as well as a view through the side window, said INH.

The picture the bank is seeing is one of fading industrial resilience and stark divergence across the eurozone.

The look in the rear-view mirror shows a relatively resilient eurozone economy in Q2, after the United States frontloading boost in Q1, stated ING. Gross domestic prouct growth was confirmed at 0.1% quarter-on-quarter, from 0.6% quarter-over-quarter in Q1.

However, the eurozone economy is anything but synchronized currently, with GDP ranging from a 1% quarter-over-quarter contraction in Ireland and a 0.1% quarter-over-quarter decline in Germany and Italy to 0.6% quarter over quarter in Spain and 0.7% quarter over quarter in Portugal.

Looking through the side mirror, however, paints a less favorable picture as industrial production (IP) plunged by 1.3% month-on-month in June, from a 1.1% month-over-month growth in May. On the year, eurozone IP was only marginally up. With Thursday's data, the strong surge in Q1 due to the U.S. front-loading of eurozone goods ahead of higher tariffs has basically been reversed entirely, wrote the bank in a note.

When looking at eurozone countries and developments since the start of 2020, structural shifts in intra-eurozone competitiveness as well as sector-specific specialization become very clear, added ING. While IP in Germany and Italy remains more than 10% and 5% below January 2020 levels, respectively, Ireland has seen a sharp surge, and countries like the Netherlands and Belgium have also recorded solid gains. Drivers behind these shifts are energy costs and competition from China.

Looking ahead, the eurozone manufacturing sector remains highly affected by two main, rather opposing, factors, according to the bank. While tariffs and the stronger euro will continue to weigh on the manufacturing sector, the gradual cyclical turning of the inventory cycle, as well as the structural shift towards defense, should support growth ahead.

The most problematic part of the forecast is the cyclical turning of the inventory cycle, pointed out ING. After huge stockpiling in 2021 and 2022 and high inventories limiting production since then, the inventory cycle showed clear signs of turning in the first few months of the year.

With the latest data, however, this turning of the inventory cycle seems to have been mainly driven by U.S. frontloading and not by a genuine cyclical turning. At least at face value, Thursday's IP data suggest that earlier signals of a turning inventory cycle currently rather look like a false start. The hoped-for industrial recovery seems to be delayed once again, noted ING.