Lack of demand continues to be holding back EU industrial growth. Recent business survey data through to October show a further drop in economic sentiment, capacity utilisation and orderbook. The main factor cited by European companies limiting production output is demand and not factors such as material or labour shortages that were an issue two years ago. Trade statistics reflect this continued weakness of European industry – particularly in Germany. However, the overall gloomy picture hides strong performance in some individual markets. This article provides commentary on the latest industrial survey figures in the context of import and export developments to key markets.
Business Survey Data
The interactive dashboard below provides an overview of key monthly and quarterly European business indicator data through to October 2024. Overall, the picture is not better than it was eight months ago, when we last covered the topic.
Our key observations:
- Overall EU economic sentiment has weakened in September and October.
- Overall consumer, Services and Retail and Construction Confidence have picked up, but industrial confidence has been declining for almost two years.
- Industrial capacity utilisation continues to follow a downward trend. Particularly Germany, Belgium and Denmark are performing poorly.
- Both overall and export orderbooks have declined, while finished production inventories have increased. Production trend and future expectations are trending downward. That is consistent across large EU economies, but data for smaller countries such as Estonia, Ireland, Latvia, Lithuania and Portugal is looking positive. Türkiye – which is included in the Eurostat dataset – is also showing an upward trend in relation to orderbooks.
- Since the second quarter of 2022, demand has increasingly been stated as the main factor limiting output. Prior to that is was labour, material and equipment shortages. These no longer appear to be issues. The picture is generally consistent across the European Union.
- New orders overall are following a downward trend as we head into the fourth quarter of the year.
- EU companies are seeing both their competitive position inside and outside the EU eroded. Much of that may be linked to the automotive business but that is not clear from the data.
Earlier this year, we expected a pick up of industrial activity in the second half of 2024. The most recent outlook for the next 12 months is less bullish.
Trade Impacts
Trade and industrial activity are linked – for trade to pick up, we need to see an uptick in industrial production. About two thirds of the value of EU imports and three quarters of EU exports are in intermediate goods and capital equipment. The share has been broadly stable over the past nine years.
Overall export value in the last 12 months is up 0.5% and weight down 2%. Import value is down 7%, while import weight is down just under 1%.
The figures below show growth in EU exports and imports for the top 15 trading partners by value. We have looked at both tonnage and value growth across all modes of transport. Most of the top export markets are negative, but exports to the US, Turkey, Mexico, Saudi Arabia and Morocco have performed well. Incidentally trade between the EU and Morocco has been following a consistent upward trend over a long period. The import side is mostly negative both in terms of value and weight. China is an exception with import weight increasing – primarily driven by household goods. This data does not capture the increases in the cross-border e-commerce segment, which mostly falls below value reporting thresholds in trade data.
