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Electronics Production | December 12, 2007

Manufacturing in Europe still<br>growing, but faces decline

The European manufacturing sector appears to have reached its cyclical peak in growth rates in the first quarter of 2007, although it is unlikely to fall into a recession in 2008, according to the MAPI European Industrial Outlook.
The report divides Europe into two distinct regions, Western Europe and Central Europe. The former generally comprises the 13 countries that form the currency union (Eurozone), while the latter includes the four largest economies of Central and Eastern Europe (CEE4): the Czech Republic, Hungary, Poland, and Slovakia.

Manufacturing production in Western Europe is still rising, if somewhat hesitatingly, but at a declining rate. German manufacturers enjoy the most robust growth dynamics and the most consistent order books, while the French and Italian producers are clearly suffering. Spanish and British companies fare somewhere in-between.

The outlook for Central Europe is more promising. Growth rates are sliding, but production is still rising at near double-digit rates, led by Slovakia on the strength of its booming auto and components sectors. All four emerging economies appear resilient in the face of mounting financial challenges in the United States and Western Europe, due primarily to the fact that the vast majority of domestic manufacturers fund themselves in local markets.

Additionally, their financial institutions hold few external assets issued outside their borders and virtually none that bear risk to under-performing sectors such as U.S. subprime mortgages. These economies, however, will be indirectly affected by falling income in Western Europe, which is the primary destination for CEE4 exports.

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