After a substantial recovery in 2009 -2011, industry in Europe has slid downward again.
Preliminary data for 2012 indicate that the contribution of manufacturing to EU GDP has fallen further to 15.1 %, increasing the distance to the indicative 20% target set forth by the Commission in 2012. If we want to reach this target and not lose the race against our competitors, more needs to be done on the EU level. This year’s European Competitiveness Report identifies the strengths to build on and the challenges to be addressed by industrial policy. It also steers the economic policy debate toward the instruments for improving the knowledge and productivity performance of EU manufacturing.
The report also makes a strong case for preserving a critical size of manufacturing in Europe. Although its share in the overall value-added has been shrinking, manufacturing has a strong spill-over effect to other sectors - additional final demand in manufacturing generates around half as much additional final demand elsewhere in the economy. As in other advanced economies, it also still accounts for a major part of the innovation effort which translates into contributions to overall productivity growth and thus to real income growth.
Recovery uneven, Europe losing its global manufacturing share
The recovery from the most severe crisis in the post-war period has been uneven across EU Member States and industrial sectors. Few countries have successfully recovered their pre-crisis level of manufacturing output (Estonia, Latvia, Lithuania, Poland, Romania and Slovakia) while the majority are far below.
With the exception of necessity goods sectors and some high-tech sectors, the majority of industrial sectors have not yet recovered from the crisis. With domestic demand remaining weak, the recovery gains are mainly due to external demand (in particular for pharmaceuticals, metal ores and transport equipment).
Even more worrisome are the data on the share of the EU manufacturing output on a global scale, which show that the share of manufacturing in Europe has been consistently decreasing, while manufacturing in China has been on the rise.