The economic recovery in EU industry has stalled in recent months.
Manufacturing output has been broadly flat over the last six months, whilst business confidence has fallen back to its historical average. Uncertainties about the prospects of the European economy and the turmoil related to the debt crisis in the euro area have taken their toll on the EU industry. High energy prices, fiscal consolidation in some countries and persisting difficulties in access to finance are also adversely affecting the dynamics of the recovery. Nevertheless EU industry is now in a better shape to face a slowdown, with lower inventories and higher productivity than in 2008. Output in the construction sector has stabilised at a relatively low level. The headline figure conceals continued weakness in house building offset by a limited recovery in civil engineering works (roads and bridges etc.).
In the third quarter of 2011, manufacturing production was 4.6% higher than a year ago and slightly above the level registered in the preceding quarter. Manufacturing output is now 15% higher than its trough in early 2009, but still some 8% below its former peak in early 2008. Output has already surpassed its previous peak in pharmaceuticals, food and in computer and electronics, and other transport equipment. The biggest contractions in production have occurred in non-metallic mineral products, wearing apparel, textiles and wood. Recent data and forecasts for services, including tourism, remain positive, but their performance will depend on the general economic situation.
Extra-EU exports have already recovered their previous peak, but they have stabilised in recent months. Growth in intra-EU trade, internal demand and private consumption continue to be subdued and lag behind, reflecting slower overall output growth in Europe as compared to the rest of the world, particularly emerging Asia.
Data on manufacturing employment in the second quarter of 2011 shows some signs of improvement with increases in temporary and part-time jobs. Nonetheless, overall manufacturing jobs have shrunk by some 11% compared to their cyclical peak in 2008. The unemployment rate, on the other hand, increased in September back to its worse crisis level, even if in some improvement was registered in some countries. Deteriorating employment expectations suggest little space for further improvement.