Manufacturing output has stabilised over recent months, following its initial strong recovery from the economic crisis. Recent data however show some reasons for greater optimism. Manufacturing production actually marginally increased in December 2011, despite a headline fall in industrial output in December driven entirely by developments in the mining and energy sectors. Business confidence also improved slightly in January 2012, after a short period of decline in the second half of 2011. It remains close to its long-term average. Continued high energy prices, fiscal consolidation and persistent difficulties in access to finance however continue to adversely affect the dynamics of the recovery. Uncertainties about the resolution of the euro area debt crisis have negatively affected investment, whilst firms have trimmed output to avoid inventory accumulation. Output in the construction sector remains close to its cyclical trough: a limited recovery in civil engineering works (roads and bridges etc.) has been offset by continued weakness in house building.
In the last quarter of 2011, manufacturing production was some 1.1% higher than a year ago, but also some 0.7% below the level registered in the preceding quarter. Manufacturing output is now 14% higher than its trough in early 2009 and some 8% below its former peak in early 2008. Output has surpassed its earlier peak in pharmaceuticals, other transport equipment, beverages and food. The biggest contractions in production occurred in textiles, furniture and basic metals industries. 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 and continue to support demand in industry. Growth in intra-EU trade, internal demand and private consumption continue to be substantially 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 third quarter of 2011 shows that number of persons employed remained broadly stable. The overall manufacturing jobs have shrunk by some 11% compared to their cyclical peak in 2008. The unemployment rate rose to a record high level, but the situation is differs greatly between countries. Deteriorating employment expectations suggest little room for imminent improvement.
- Monthly Note - February 2012 (302 KB)