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ECONOMIC NEWS - EUROPE

European Industrial Production, September 2021:  Following on from the UK manufacturing output data that we reported last week, Eurostat has published the equivalent data for Europe.  It is worth noting, however, that the top level figures are for industrial production which is dominated by manufacturing but also includes energy production;  also, the Eurostat data in their “euro-indicators” publication is only monthly.

Total industrial production in September was -0.2% lower than in August for the Euro-zone and -0.5% down for the EU as a whole.  This leaves the levels +5.2% and +5.0% higher respectively than a year ago in September 2021.

The month-on-month fall was led by the capital goods industries where output fell by -0.7% in the Euro-zone and by -0.9% for the EU compared to August.  Looking back a year, production of capital goods in the Euro-zone increased by +5.9% but only by +4.0% for the EU as a whole.

Continuing with the 12-month comparisons, of the 25 Member States who have published their figures (Greece and Cyprus are missing), total industrial production increased in 18 and fell in 7. The

largest increases were in Ireland (+45.4%), Belgium (+23.1%) and Lithuania (+19.6%), while the most significant reductions were in Slovakia (-4.9%), Portugal (-4.8%) and Czechia (-4.0%).

You can get the full details from the Eurostat News Release which can be downloaded from their web-site at https://ec.europa.eu/eurostat/news/euro-indicators (12 November) or requested from MTA.

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European GDP, 3rd Quarter 2021:  Eurostat has updated its preliminary release from a couple of weeks ago but its estimates for GDP growth in the Euro-zone and the EU as a whole are unchanged at +2.2% and +2.1% respectively.  In both cases, these are just a tick up from the trends for the 2nd quarter of the year - this is in contrast to the UK performance where GDP growth was +5.5% in the 2nd quarter and only +1.3% in Q3.

Compared with a year ago, seasonally adjusted GDP in the Euro-zone grew by +3.7% with an increase of +3.9% for the EU - again, these are unchanged from the preliminary release.  Eurostat also notes comparisons with the USA which had quarter-on-quarter growth of +0.5% in the 3rd quarter which gave growth of +4.9% compared to a year earlier.

Eurostat now has data for 20 of the EU Member States and none of them had a negative trend in Q3, although Lithuania is listed at zero (0.0%);  apart from that, the slowest quarterly growth rates were in Latvia and Romania (both +0.3%) and Slovakia (+0.4%), while the fastest growing economies were Austria (+3.3%) and France (+3.0%).  Similarly, looking back to a year ago, all of the countries which have published their Q3 data showed growth over this period - this ranged from +0.4% in Bulgaria up to +8.0% in Romania.

You can get the full details from the Eurostat News Release which can be downloaded from their web-site at https://ec.europa.eu/eurostat/news/euro-indicators (16 November) or requested from MTA.

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European Commission Autumn Economic Forecast:  The European Commission has published its new Economic Forecast which covers the European Union and its’ Member States, the candidate countries (Turkey, Serbia, North Macedonia, Montenegro and Albania) and some of the larger global economies, including the UK, USA, Japan, China, EFTA and Russia.

The latest outlook suggests that GDP growth in the EU will reach +5.0% in 2021 before easing to +4.3% in 2022 and +2.5% in 2023.  Within this area, the Euro-zone is expected to see the same growth rates for this year and next but a slightly slower rate of +2.4% in 2023.

The summary notes that the EU “regained its pre-pandemic output level in the summer” although the basis for this claim is not clear - as we noted last week in looking at the UK data for the 3rd quarter, none of the major EU economies have seen GDP levels back to the Q4-19 level which is generally taken to be the pre-pandemic position.

Although these forecasts are generally a little better for 2021 than in the previous edition (Spring 2021), the Commission notes that economic headwinds are mounting, so the forecasts for 2022 are little changed from 6 months ago.  They make particular reference to the problems on the supply side of the economy including global logistics, production of raw materials and semi-conductors and localised pandemic lockdowns or labour shortages which mean that the economy struggles to keep pace with abrupt swings in demand.  There is a special section in the report on the supply-chain bottlenecks which covers the main areas and is well worth a read (it is a separate download extracted from the main report to save you having to plough through the whole 204 pages!).

On top of this, surging prices for energy (both gas and electricity) are also expected to dampen demand in the short-term at least and there are potential knock-on impacts on both household consumption and business investment.  Overall, although lower than at the time of the first wave of infections, uncertainty remains at a relatively high level and leaves the balance of risks on the downside of the forecast.

This report inevitably has to be a high level summary but it is worth taking a quick look at the forecast for investment spending on equipment.  As with GDP as a whole, the forecast for 2021 has been raised slightly compared to 6 months ago, but at the cost of a modest down-grading for 2022;  for the EU, this is expected to grow by +10.1% this year, +6.1% next year and +4.6% in 2023, with the Euro-zone having the same rate in 2021 but slowing to +5.4% in 2022 and +4.5% the following year.  Somewhat surprisingly, there is no forecast for either industrial production or manufacturing output.

More details of the forecast by country are contained in the full report and the statistical appendix which you can find on the European Commission’s web-site at https://ec.europa.eu/info/business-economy-euro/economic-performance-and-forecasts/economic-forecasts/autumn-2021-economic-forecast_en (scroll down the page to find the document downloads).