European Industrial Production, September 2022: Last week we reported on the UK manufacturing output data and we now have the equivalent figures for Europe from Eurostat. However, these are compiled on a slightly different basis with Eurostat using industrial production; although this is mostly manufacturing output, it also includes energy production.
Total industrial production increased by +0.9% compared to the August figure for both the EU and the sub-set of the Euro-zone. This means that industrial production is +5.7% higher than a year earlier in the EU, with growth of +4.9% for the Euro-zone.
Among the sub-sectors covered by the Eurostat report, output of the capital goods industries in the EU grew by +1.7% compared to August 2022 and by +14.3% over the level of September 2021 – the latter is, by far, the strongest growth rate among the industry categories. For the Euro-zone, the month-on-month increase for capital goods output was +1.5% taking the level +13.5% higher than a year earlier (again, the strongest growth).
By country, focusing on the growth rates compared to a year earlier, among the 26 Member States that have published their data (Cyprus is missing as usual), 20 had an increase in industrial production and 6 reported a reduction. Among those for whom there had been a rise in output, 6 had double digit trends, led by Ireland (+31.0%) and followed by Denmark (+19.0%), Malta (+14.2%), Hungary (+11.7%), Bulgaria (+11.0%) and Poland (+10.0%). The most significant reductions were in Estonia (-7.5%) and Latvia (-3.7%).
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 (14 November) or requested from MTA.
European GDP, 3rd Quarter 2022: In an update to its preliminary publication a couple of weeks ago, Eurostat has not changed its estimate of quarter-on-quarter growth in GDP of +0.2% for both the EU and the sub-set of countries in the Euro-zone in the 3rd quarter of 2022. The estimates of growth compared to a year earlier are also unchanged at +2.4% for the EU and +2.1% for the Euro-zone.
Note that the figures for the UK are -0.2% for the quarter-on-quarter change and +2.4% higher than a year earlier.
The main development is that we now have figures for 21 of the EU Member States; for the quarter-on-quarter trend, 14 countries reported a rise in GDP and 7 had a decline. However, all of those with a negative GDP trend for Q3-22 saw growth in the 2nd quarter, so no European country was in a recession, although we don’t yet have the figures for Estonia or Luxembourg which both saw their economy contract in Q2 (Poland was the other negative in the previous quarter but they had growth of +0.9% in Q3).
For the quarter-on-quarter trend, the strongest growth was in Cyprus, Romania (both +1.3%) and Poland (+0.9%); the most significant reductions were in Latvia (-1.7%) and Slovenia (-1.4%). Among the major European economies, growth was fairly muted, although Italy managed +0.5%; growth in Germany was +0.3% and both France and Spain registered +0.2%.
Looking back over the past year, only the Latvian economy has contracted (-0.4%) with growth in the other 20 Member States who have released their data for the 3rd quarter – France (+1.0%) and Germany (+1.1%) were the slowest growing.
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 (15 November) or requested from MTA.
European Commission Autumn Economic Forecast: The European Commission (EC) 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, but not Switzerland.
The overall impression is of a weaker outlook than at the time of their previous forecast (Spring 2022), although this year as a whole looks like being a little better than had been expected six months ago.
Not surprisingly, the EC expect the European economy to contract around the turn of the year, especially given that the forecast for 2022 has been upgraded to +3.3% for the EU (+3.2% for the Euro-zone) as a result of a stronger than anticipated first half of the year. However, this recession is short lived as there is only negative growth in Q4-22 and Q1-23 so the overall forecast is that GDP in the EU will grow by +0.3% in 2023 (the same for the Euro-zone) and then by +1.6% (Euro-zone +1.5%) in 2024.
The experiences of the various countries varies with some (including Spain, Netherlands and Poland) avoiding a recession by only having one negative quarter. As a result, along with the EU, most European countries still have growth for 2023 as a whole although in almost all cases (Estonia is the exception) this is slower than for this year. Only three EU countries have a negative GDP forecast for 2023 – Latvia (-0.3%), Sweden (-0.6%) and, perhaps most significantly, Germany (also -0.6%).
Given the importance of manufacturing in the Germany economy, that does not bode well for this sector, although the Commission’s forecasts don’t have specific sectoral predictions. It does, however, include forecasts for investment in equipment, although without any quarterly profile to help us establish the real length and timing of any downturn.
Overall, investment in equipment in the EU is expected to grow by +3.7% in 2022, +0.1% in 2023 and +2.9% in 2024 – for the Euro-zone the predictions are +4.0%, -0.3% and +2.7% respectively. In this case, while most countries still have growth in 2023, the most prominent exception is France where a fall of -5.1% is predicted; among the major economies, Netherlands (-0.4%) and Germany (-0.2%) are also expected to be negative.
Inflation is expected to peak at the end of 2022 before declining slowly during 2023 but any significant move back towards the target level has to wait until 2024. Of course, the course of the Russia-Ukraine war and the supply and price of gas (and other energy) are crucial to this particular forecast and remains a “known-unknown”.
Despite this general economic gloom, the labour market is expected to remain fairly resilient and although the unemployment rate rises in 2023, it only goes from 6.2% in 2022 to 6.5% next year. As usual, this is predicted to lag the general economic cycle.
This note can, inevitably, only be a high level summary – the full report runs to 220 pages including the statistical appendix but it might be worth noting a couple of key figures from the EC’s forecast for the UK economy. For GDP, they forecast growth of +4.2% in 2022, a decline of -0.9% in 2023 and then a return to growth in 2024 at +0.9%; compared to the OBR forecast from this week’s Autumn Statement, their forecast is a flatter curve with a more moderate decline in 2023 followed by more muted growth in 2024.
On investment, their view for the UK is for growth of +5.9% in 2022, a fall of -1.4% in 2023 and then a return to growth at +2.6% in 2024.
Many more details of the forecast, including those for individual countries, are contained in the full report and the statistical appendix which you can find on the European Commission’s web-site at https://economy-finance.ec.europa.eu/economic-forecast-and-surveys/economic-forecasts_en (select Autumn 2022). This forecast was closed on 31 October and includes inputs up to 27 October.