European Industrial Outlook: Uncertainty a Drag
Provided by MAPI
Total industrial output fell 2.3% in the third quarter in the Eurozone and 2.7% in the EU27. In the Eurozone, intermediate goods and consumer durables bore the brunt of output attrition in the third quarter.
European leaders are struggling to manage electorates’ declining confidence in European institutions. A federated banking system – a pan-European framework that aims to unify supervision and future crisis resolution – appears to be a distant concept. On the bright side, the ECB has suffused its language with moral suasion that promises to avert a collapse of the Euro through muscled monetary operations.
Industrial production in Germany decelerated sharply in the third quarter as demand for investment goods weakened worldwide. Domestic consumers are still spending, however, and investment in residential housing is on the rise. Both will contribute to moderate growth in 2013.
Poland’s briskly growing manufacturing sector is headed for a wall of lower spending. Construction markets in particular will suffer from a lack of new orders in 2013 as big infrastructure projects come to an end. Expect industrial output to grow only in small single digits next year.
The vast majority of industrial sectors in the Eurozone have moved into an accelerating decline phase. The Central European cycle, however, has barely changed compared to six months earlier. Most durable investment goods are doing well and most process industries seem to be at a cyclical peak.
Chemicals and their products will see a 1.7% output decline in 2012 in the Eurozone, with gradual recovery setting in during late 2013 and early 2014. Basic chemicals, which include plastics and rubber in primary form, are suffering from a decline in demand for intermediate products. In contrast, pesticides, fertilizers and agrochemicals are still performing well, spurred by continuing agricultural investments worldwide on the back of high food prices.
Electrical-equipment markets are being hit from all sides: an investment slowdown is depressing motors, a fall off in auto sales is dampening batteries and generators, and construction malaise is putting downward pressure on the output of lighting equipment and domestic appliances. Production will climb some 4-5% in each of the next two years in Central Europe (more in the Czech Republic than in Poland), whereas only the U.K. will experience growth among five large Western European economies.
The recession in the heavy-machinery sector is forecast to be moderate on account of still strong output of fluid power equipment, forestry and agricultural gear and machine tools. In contrast, engines, special-purpose machinery and office equipment will pull the production index down.
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