Commentary: Europe turns a corner

Positive data from some southern European countries which have been mired in recession for many years suggests a recovery is gathering pace, though there is a long way to go

Some good news on manufacturing output suggests a nascent recovery is starting to take place in some of the European nations most badly affected by the financial and economic crisis that has enveloped the region since 2008. This should be good news for Europe’s chemical industry.

Confidence is returning to eurozone manufacturing Copyright: Rex Features

In Spain, factory output increased at its fastest rate in 41 months, according to financial services firm Markit’s manufacturing Purchasing Managers’ Index (PMI). The index for employment in manufacturing rose above 50 for the first time since October 2010 (below 50 indicates contraction and above, expansion). Markit analysts said a sense of optimism is pervading Spain’s manufacturing sector. GDP rose by 0.3% in the final three months of 2013. Competitive pricing also helped Spanish business: private-sector companies have lowered their selling prices continuously since September 2008.

Even in Greece, whose economy has been in freefall since its financial crisis hit, has shown an expansion in manufacturing for the first time since August 2009. Factories said that production was increasing and exports were rising. The threat of deflation does hang over Greece, as it does over other parts of Europe. Firms in Greece continued to lower prices.

The eurozone manufacturing PMI stood at 54.0 in January, up from 52.7 in December, thanks to Germany’s performance, which reached a 32-month high. Markit said the growth in Germany was due to the highest growth in output and new orders for almost three years, strengthening demand from foreign markets and employment levels increasing.

A downturn in France showed signs of easing, as new orders, output, employment and stocks of purchases declined at slower rates.

Europe’s chemical sector could do with some good news. The region has become more of a target for competitive exports from the Middle East and the resurgent North America. New capacity coming onstream in Asia has added to its woes. Domestic demand has been patchy at best, so some improvement in local markets would give it a much-needed boost.

ICIS data shows that there were five cracker closure or capacity-reduction announcements in 2013, from INEOS, Repsol, Versalis and two from Total. As more new plants come onstream in the Middle East and US, with owners hungry to export, Europe will need a better economy, and some new ideas, to maintain a leading position in the global landscape.

Do you agree?
Email: joseph.chang@icis.com or go to the commentary blog at icis.com/blogs/editorscommentary