2 NOVEMBER 2011

Unlike the previous quarter, production capacity in the manufacturing industry in each the Euro area and the EU 27 is expected to climb substantially in Q4, over four points on average, according to the European Commission's latest quarterly business survey www.ec.europa.eu  published last week. Industrialists were polled however ahead of the October 26th EU Summit on the Greek sovereign debt crisis.

In the Euro area, the index is projected to rise to 12.7 points (8.4 points in Q3) and in the EU 27 to 13.3 points (from 11 points in the previous quarter). France's index is forecast to rise to 7.9 points (from 3.6 in Q3) and Germany's is expected to turn positive to 6.1 points (from -3.1 points). Italy's and Spain's respective indices are seen as more subdued, but  on the rise, respectively to 28.5 points (from 26.4) and to 21.1 points (from 19.9). In the UK, the index is by contrast projected to decline to 15.2 points (from 26.4). In Sweden, with 3.7% weighted impact on EU output, the largest among Nordic states, production capacity is foreseen to leap to 20.1 points (from 7.4 points in Q3).

The number of months estimated in production assured by orders in hand in the manufacturing industry is projected as stable, 3.3 months in the Euro area (from 3.4 months in Q3) and 4 months equally to the previous quarter in the EU 27. France's index is projected to increase to 4.4 months (from 4.2 months in Q3), while export-led Germany foresees a slow down to 2.9 months (from 3.2 months in Q3). In Italy, the index is expected to remain unchanged at 3.2 months (from 3.1 months) while Spain's is likely to stall to 1.9 months (from 2.1 months). In the UK, the index is seen slightly downwards to 3.5 months (against 3.7 months in Q3).  The Czech Republic's index is steady at 7.3 months and for the fourth consecutive quarter, equally to Poland's at 18.7 months, eastern Europe's largest economy. 

Competitiveness on foreign markets outside the European Union is also projected stable, although non euro area member states expect their competitive position to rise since the single currency's troubles, due to the lingering Greek crisis, has been beneficial to impose lower prices. In the EU 27, the competitiveness index rose to 2.7 points for Q4 (compared with 1.8 in Q3) while the Euro area's gauge inched up to 2.3 points (from 2.2 in Q3). However, the Euro's recent decline against foreign currencies is foreseen as positive in France in Q4 where competitiveness is expected to turn positive to 3.2 points (from -2.6 points in Q3).

By contrast in Spain, where the country's debt and drastic austerity measures have pushed down export order books demand, the  competitive edge index is projected down to 4.7 points (from 9.4 point sin Q3). Greece's index is projected into negative territory, to -5 points (from -2.8 in Q3)  due to a potential default parameter and the country‘s lack of confidence over a sovereign debt crisis resolution.