On the basis of substantially revised Eurostat data, manufacturing output is now assessed to have weakened somewhat since the middle of 2011, interrupting the economic recovery. Nevertheless business confidence has remained broadly at its long-term average in recent months.
Resurgent international raw materials and energy prices, fiscal consolidation and on-going difficulties in access to finance continue to adversely affect the dynamics of the recovery. Output in the construction sector has fallen substantially in recent months reaching its record low levels particularly following a strong fall in February in civil engineering works (roads and bridges etc.).
In the last three months to February 2012, manufacturing production was some 0.2% lower than a year ago and also some 0.9% below the level registered in the preceding three months. Output has fallen back in the majority of sectors over the last three months: the biggest contractions in production occurred in other non-metallic products, basic pharmaceuticals and beverages industries. Overall manufacturing output is now 12% higher than its trough in early 2009 and some 9% below its former peak in early 2008. Recent data and forecasts for services, including tourism, remain positive, but their future performance depends on the general economic situation.
International demand for EU products has increased rapidly and has supported EU manufacturing production (see last month's special article on the external competitiveness of EU manufacturing). Extra-EU exports have already recovered their previous peak. In contrast, intra-EU trade, internal demand and private consumption continue to be subdued and overall output growth in Europe has lagged that in the rest of the world, particularly emerging Asia and Latin America.
Data on manufacturing employment in the fourth quarter of 2011 shows that the 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 differs greatly between countries. Deteriorating employment expectations suggest little room for immediate improvement.