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Muted Outlook for Europe in 2014 Says Industry Group

Feb. 10, 2014
Industrial production is expected to inch up less than two percentage points in the Eurozone in 2014.

Despite the fact that the region dug itself out of a technical recession, economic activity in the Eurozone remains weak according to the Manufacturers Alliance for Productivity and Innovation’s European Industrial Outlook.

The report analyzes 13 major economies: Austria, Belgium, the Czech Republic, France, Germany, Hungary, Italy, the Netherlands, Poland, Spain, Sweden, Switzerland, and the United Kingdom.

The report forecasts industrial production growth of more than 3% in 2014 in only four countries—the Czech Republic, Germany, Poland, and Switzerland.

Overall GDP growth for the Eurozone is forecast to be between 0.5% and 1% this year.

"Industrial production fell in four out of the last six months of 2013, unemployment topped 12%, and inflation is undershooting the ECB’s target by a full percentage point,” said Kris Bledowski, Ph.D., MAPI senior economist. “Domestic demand has contributed virtually nothing to growth and the demand for European exports is weakening. With the private sector expected to deleverage further and tight fiscal policies remaining in place, the outlook for 2014 is muted.”

Industrial production is expected to inch up less than two percentage points in the Eurozone in 2014.

Any improvement in demand for Europe’s manufactured products will be aided by a jump in fixed investment. According to the report, higher capacity usage, coupled with better access to external finance and gradually improving balance sheets, should spur capital formation, Conversely, personal consumption, residential investment, and to a lesser degree government demand will lag behind.

Bledowski explained the reasons for the brighter outlook among the four countries expected to see higher growth. “Poland and the Czech Republic retained their industrial base during the recession, restructured early, and withstood the down cycle better,” he said. “Germany and Switzerland were plugged into the investment boom in Asia and were therefore insulated from the downturn.”

Industrial Production Growth Rates and Forecast

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