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New Year Already Tough for EU

The new year hasn't given Europe much to celebrate yet. Recently released industrial and employment data shows the ongoing drag that austerity and recession prevention measures are having on the economy here.

Industrial production across the euro zone fell for the third straight month in November, according to Eurostat. Output slipped 0.3 percent from October and 3.7 percent from November 2011. The consensus forecast had called for 0.1 percent growth.

The year-over-year slide was the biggest since November 2009. And most indicators from the last three months of the year seem to point to a third consecutive quarter of general contraction for the 17-country bloc.

News reports have attributed the decline to across-the-board weakness and steep drops in the production of intermediate and capital goods. But a rising unemployment rate isn't helping matters. The euro zone's seasonally adjusted unemployment rate for November rose 0.1 percentage points from October and 1.2 percentage points from November 2011 to 11.8 percent, according to Eurostat. For comparison's sake, the US unemployment rate for November was 7.8 percent.

There was a dim positive note for the electronics industry. Industrial output in Germany, a hub for the high-tech and auto sectors, rose a modest 0.1 percent in November, Eurostat said. The country also had one of the lowest unemployment rates in the EU (5.4 percent).

I don't know about you, but this kind of news keeps turning my stomach, especially as someone based in Europe. It's like the recession will never end here, and there's really no end in sight.

What does this mean for the electronics supply chain? We'll know more about how individual companies fared when earnings are announced in the next few weeks, but I'm not expecting stellar overall results. As we’ve reported before, many of the high-tech bellwethers have been struggling the last few quarters, bumping along slowly toward recovery or moving forward with significant shakeups.

If I had to put money down, I'd bet we'll hear companies — especially those dependent on consumer holiday sales — say revenue conservatively inched up in the last quarter of 2012, though new orders in Europe were slow. Anything other than that would surprise me.

What will be more interesting is how companies and executives respond to Europe's ongoing economic slump. We all know it's an important and mature market, but what measures will executives announce now that it looks like the EU will report three consecutive quarters of economic contraction? How will they help turn these numbers around?

13 comments on “New Year Already Tough for EU

  1. bolaji ojo
    January 16, 2013

    This blog covers the entire EU economy. Are there differences at national levels, that is, are the factors you identified general to all the EU member states or are some nations better off than others?

  2. SunitaT
    January 17, 2013

    Industrial output in Germany, a hub for the high-tech and auto sectors, rose a modest 0.1 percent in November

    @Jennifer, thanks for the update. Its really surprising to see that EU is still struggling to come out of recession when markets acorss the world are scaling new highs. But looking at the EURO currency movement looks like things are slightly improving in europe and in 2013 we might see full recovery in the EU economy.

  3. Wale Bakare
    January 17, 2013

    It's tough indeed especially the employment –  two days ago HMV, CD and DVD high streets seller announced in UK that 8,000 jobs are at risk as the firm called in administrators and today, Nokia reports 300 jobs to go globally and Finland office would affect most.

    I would say “work in progress” of technology disruption majorly responsible for HMV firm problem as larger percentage of music lovers would rather buy music online than off the shelves. Businesses need to smarting up or get outsmarted by smart-things. I think.

     

  4. Cryptoman
    January 17, 2013

    I think before we see any improvements in Europe, tough decisions on Eurozone and the debt of countries such as Greece need to be made. Europe is fighting a battle to avoid economical disintegration at the moment. I think an important part of this battle is political as well. Therefore, Europe's economical performance in 2013 will heavily rely whether it can make tough decisions by leaving politics aside for a while. This is easier said than done though…

  5. bolaji ojo
    January 17, 2013

    I think European Union leaders are capable of taking the tough decisions that will power growth in the region. There are a lot of cobwebs to sweep aside but in 2012 they finally took some tough decisions. They'll do the same this year although it may take a while It isn't easy bringing all the odd parts into harmonious action.

  6. SunitaT
    January 18, 2013

    I think before we see any improvements in Europe, tough decisions on Eurozone and the debt of countries such as Greece need to be made.

    @Cryptoman, I agree with you. But other countries can take lessons from what happened in europe. In Europe they have social programs that have been granted to an aging population, and the proper money hasn't been set aside to pay for those and the bills have come due. The United States is just entering that right now and they need to take steps to avoid Europe kind of situation.

  7. mfbertozzi
    January 20, 2013

    @Cryptoman: speaking for myself, I think you are right; after all, I am positive, sooner or later any local country within EU will act with a common and shared plan and way to think; it takes time, maybe a few years.

  8. mfbertozzi
    January 20, 2013

    @tirlapur: analysts from the finance sector, have demonstrated that crisis has started, initially, exactly from US a few years ago; maybe we will assist to a new cycle, I mean, US right now are moving away and recovering?

  9. Jennifer Baljko
    January 21, 2013

    Bolaji – yes, some countries (mostly northern European countries) are faring better than those in the south, as can be seen in this chart (http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/4-14012013-AP/EN/4-14012013-AP-EN.PDF). But Europe, like the US., is still recovering from a deep crisis where austerity measures haven't quite converted to positive growth, confidence in consumer spending or sustainable job creation.

  10. Jennifer Baljko
    January 21, 2013

    tirlapur – knocking wood that 2013 is a better year. And which markets are you speaking of in terms of “scaling to new heights.” I think similar economic softness is in the headlines in the mature, western markets.. and the US is still dealing with a trade deficit and growing national debt. Emerging markets are different.

  11. Jennifer Baljko
    January 21, 2013

    @Wale – Right… the same is true with US companies like Blockbuster – who rents movies anymore? Certainly something to consider – some business models have run their course and even if they revamp operations may no longer be relevant in today's world.

  12. Jennifer Baljko
    January 21, 2013

    @cryptoman – like Bolaji said, I think the EU is making hard decisions which are trickling down to individual countries. One problem I see, however, is that while the region works on a single currency and has some centralized government organization, it's still a collection of individual nation states who set their own tax-levying policies and adminster their own health, school, and social programs. And, while stronger EU nations dictate many of the rules, it's not a federal system.

  13. Cryptoman
    January 21, 2013

    @Jennifer

    There is also the complication of having countries that are in the EU but are not within the Eurozone such as the United Kingdom. UK still uses the British Pound as its currency and is among the top 3 influencers in the EU. I think UK has the best of both worlds by sticking to its powerful currency and yet keeping a strong foothold within the EU.

     

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