European Industrial Production, August 2023: Eurostat also published its output data this morning, although the aggregate they quote is for Industrial Production (IP) – the largest part of this is manufacturing, but it also includes energy and utilities (but not construction). Also, the way in which Eurostat publishes these figures requires a lot of digging to get to the 3-month rolling trends we prefer to use.
Total IP was +0.6% higher than in July for both the EU and the sub-set of the Euro-zone. However, compared to a year earlier (August 2022), the latest figure is a decrease of -4.4% for the EU and -5.1% in the Euro-zone.
Compared to July 2023, output of the capital goods industries – the sub-sector of most relevance to our members – edged up by +0.1% in the EU and by +0.3% for the Euro-zone. Looking back to August 2022, output of this group of industries declined by -5.2% for the EU and by -7.0% in the Euro-zone.
Continuing with the 12-month comparison, of the 26 Member States who have published the data (Cyprus is missing as usual), total IP increased in only 5 and fell in 21, although this is a slight improvement on July where only 4 countries (including the now published Cyprus) had an increase in total IP.
The fastest growth was in Slovakia (+4.7%), Denmark (+3.5%) and Malta (+3.0%) with the most dramatic reductions compared to August 2022 in Ireland (-27.3% – but note that this is often very volatile due to the large presence of multi-national company’s headquarters), Slovenia (-12.3%) and Estonia (-11.9%).
Among the largest EU economies, the changes in output in August 2023 were relatively modest ranging from -4.2% in Italy, though -3.6% in Spain and -2.3% in Germany to France where a decline of -0.4% was recorded.
You can get the full details from the Eurostat News Release which can be downloaded from their website at https://ec.europa.eu/eurostat/news/euro-indicators (13 October) or requested from MTA.
European Investment & Profitability, 2nd Quarter 2023: Eurostat has published data on the investment rate and profitability although, bizarrely, this is mixed up in a report which is headlined to be about the household saving rate.
The investment rate for non-financial corporations in the Euro-zone fell from 23.8% in the 1st period of the year to 23.4% in Q2; this means that it matches the rate recorded a year ago in the middle of 2022. The gross investment rate of non-financial corporations is defined as gross fixed capital formation divided by gross value added – this ratio relates investment in fixed assets (buildings, machinery etc.) to the value added created during the production process. The fall in the investment rate was because business gross fixed capital formation decreased by -0.4%, while gross value added increased by +1.1%.
The profit share of non-financial corporations in the Euro-zone decreased to 40.8% compared to 41.1% in the first period of 2023; indeed, this measure has been falling since its peak of 41.4% in the 3rd quarter of 2022. The profit share of non-financial corporations is defined as gross operating surplus divided by gross value added. This shows the share of the value added created during the production process remunerating capital and it is the complement of the share of wage costs (plus other taxes minus other subsidies on production) in value added. The lower level of business profit share is explained by the increase in business compensation of employees (wages and social contributions) plus taxes less subsidies on production at +1.6% being at a faster rate than the growth in gross value added (+1.1%). You can get the full details from the Eurostat News Release which can be downloaded from their website at https://ec.europa.eu/eurostat/news/euro-indicators (5 October – listed as “household saving rate” which is part of the same document) or requested from MTA.