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Monthly Note on Economic Recovery in Industry - June 2012

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Industrial production continues on its weakening trend that has interrupted the
economic recovery of industry since the second half of 2011. Trend-adjusted
manufacturing output in April was some 1.5% lower than a year ago. There was a further steep decline in industrial confidence in May. The ECFIN industrial confidence indicator is now well below its longer-term average. Similarly, the PMI confidence indicator points out to further contraction in the euro area. Great uncertainties about the economic outlook and difficulties in access to finance continue to weigh down business confidence. Nevertheless, cost pressures on manufacturers have lessened a bit following lower inflation of commodity goods prices and subdued wage demand. Construction output has fallen steeply in recent months, especially through a strong contraction in civil engineering (roads, bridges etc.).
Overall in the last three months to April of 2012, manufacturing production was some 1.5% lower than a year ago and also some 0.7% below the level registered in the preceding three months. The situation varies across sectors, but only few industries manage to continue their recovery. In the last three months to April 2012, the highest growth was registered in chemicals, machinery and equipment, and computer and electronics, whilst the biggest
declines in production occurred in other non-metallic products, leather and printing sectors. Manufacturing output is now 11% 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 will be affected by general economic situation.

Expansion of international demand for EU products supports EU manufacturing production. Extra-EU exports have already exceeded their previous peak. In contrast, intra-EU trade, internal demand and private consumption continue to be subdued. The recovery in output growth in Europe has greatly lagged that in the rest of the world, particularly emerging Asia and Latin America.
Data on manufacturing employment in the first quarter of 2012 shows that the number of persons employed remained broadly stable. Manufacturing jobs have shrunk by some 11% compared to their cyclical peak in 2008. The unemployment rate stays at a record high level, but the situation varies greatly between countries. Weak employment expectations suggest little room for immediate improvement.

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