The European economic recovery is well entrenched, although storm clouds loom during the next 18 months, according to the Manufacturers Alliance/MAPI. The group released a report on June 29 that analyzes two distinct regions: Western Europe and Central Europe. The former generally comprises the 16 countries that form the currency union (Eurozone), while the latter includes the three largest economies of Central and Eastern Europe (CEE3): the Czech Republic, Hungary, and Poland.
Kris Bledowski, Ph.D., Manufacturers Alliance/MAPI economist notes that forecasts for gross domestic product (GDP) oscillate around 1.5% growth for the Eurozone for 2011 and approximately 1.8% growth in 2012. GDP growth in Central Europe should reach upward of 3.5% in 2011 and 3.8% in 2012.
"Germany, Scandinavia, Slovakia, Poland, and Turkey are powering ahead," he said. "In another group of countries -- Portugal, Romania, and the United Kingdom stand out here -- fiscal retrenchment is weighing on income and business investment, ultimately putting a damper on output. Overall, manufacturing production will jump some 9% in 2011 in Central Europe and about 4% in the Eurozone. A slightly more subdued 3% is forecast for 2012 in the Eurozone but a more robust 10% in Central Europe."
In the Eurozone motor vehicles are predicted to grow at 14% in 2011 and 7.7% in 2012. Wood and products, nonmetallics, textiles, and paper and products are expected to decline in both years.
In Central Europe computers and electronics production will experience some volatility in the next two years, declining by 2.4% in 2011 followed by a 15.8% increase in 2012. Motor vehicles is predicted to be the lead sector in 2011 with 16.2% growth and is anticipated to increase by 15.8% in 2012.
"We are currently on the cusp of an investment-led phase of the cycle, encompassing all regions of Europe," Bledowski said. "Capital goods output is rising at a 13% clip in Europe and at an even higher rate in Central Europe, pulling demand for intermediate goods with it. There are signs, however, that export demand is plateauing as intra-European trade itself is experiencing less robust growth."