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European Recovery 'Slower than Anticipated'

The European economy is recovering from the severe recession of 2009, albeit gradually and slower than anticipated, according to the semiannual Manufacturers Alliance/MAPI European Industrial Outlook: 2010-2011, a report that analyzes 14 major industries.

The report separately analyzes two distinct regions: Western Europe and Central Europe. The former generally comprises the 16 countries that form the currency union (Eurozone), while the latter includes the three largest economies of Central and Eastern Europe (CEE3): the Czech Republic, Hungary, and Poland. All forecasts are based on a proprietary MAPI model.

Forecasts for gross domestic product (GDP) oscillate around 1 percent growth for the Eurozone for 2010, and for approximately 2 percent growth in 2011, according to Kris Bledowski, Ph.D., Manufacturers Alliance/MAPI economist and report author. GDP growth in the non-euro economies should reach upward of 2.5 percent, led by Central Europe.

"Despite the headwinds of financial turmoil centered on refinancing sovereign bonds of southern European states, demand and production are on the mend," Bledowski says. "Robust growth in Asia and North America has underpinned European exports while selected stimulus programs reinforced domestic demand.

"Still, the financial sector is reluctant to lend and investors are weary of supplying fresh equity capital in the wake of the uncertain political economy of the European Union. European industry generally relies more on bank financing than do firms in the United States. Labor conditions continue to lag behind the recovery in production, spelling sagging productivity and a corresponding drag on competitiveness."

In the Eurozone, the report predicts 10 of 14 industries will show growth in 2010, led by motor vehicles at 19.5 percent. Six of 14 industries are anticipated to grow in 2011, with machinery and equipment leading the way at 5.9 percent. Three industries – wood and products, nonmetallics and construction – are expected to decline in both years, although all will likely rebound from significant declines in 2009.

In Central Europe, 12 of 14 industries are expected to show growth in 2010, and 10 of 14 should expand in 2011. Computers and electronics production will experience some volatility in the next two years, advancing by 31.8 percent in 2010 but followed by a 2.1 percent decline in 2011. Electrical equipment is predicted to be the lead sector in 2011 with 11.2 percent growth.

Six industries are in the accelerating decline (either early recession or mid-recession) phase of the business cycle in the Eurozone, while eight industries are in the decelerating decline phase (late recession or very mild recession). None is in the accelerating growth (recovery) or in the decelerating growth (expansion) phase of the cycle.

In Central Europe, eight industries are in accelerating growth; one industry, petroleum and coke, is in accelerating decline; five industries are in decelerating decline; and none is in the decelerating growth phase.

© 2019 Gale Media, Inc.

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