Industrial groups in the euro area suffered their biggest monthly fall in production for more than two years in July, underlining the impact of surging energy prices and supply chain bottlenecks on the region’s growth prospects.

Factory output in the 19 countries that share the euro dropped 2.3 per cent in July from the previous month, its biggest fall since April 2020, Eurostat, the European Commission’s statistics office, said on Wednesday. It was a larger decline than the 1 per cent decrease expected by economists polled by Reuters, and was party explained by a sharp drop in Ireland.

Economists expect the higher cost of power to continue to hit manufacturing, and consumer spending, in the coming months. “Further contractions in industry are on the horizon,” said Rory Fennessy, an economist at Oxford Economics, adding that companies would be “forced to cut back production even if hard rationing is to be avoided”.