Manufacturing Group Sees Widespread Slowdown In European Growth

Economic outlook by the Manufacturers Alliance/MAPI says the region saw an industrial cycle peak in 2006, but will not experience a sudden decline.

Although the economic outlook throughout Europe this year is generally good, manufacturing growth is likely to see a widespread slowdown, according to the Manufacturers Alliance/MAPI.

Higher borrowing costs are expected to push down residential construction investment, but higher personal incomes and a drop in unemployment should boost sales.

Eurozone growth has relied more heavily on exports than the UK, which was helped by services. Central Europe saw double-digit growth of exports, as well as increased productivity from low cost labor coupled with capital-intensive plants.

However, for 2007, the Manufacturers Alliance/MAPI expects a move away from exports toward domestic investment to fuel growth.

Central European production is at a 10 percent growth rate, while the U.S. is expected to see only a 2.5 percent manufacturing production rate in 2007, with an increase to 3.1 percent for 2008.

The economic outlook says Europe experienced its cyclical industrial peak in 2006, but strong durable goods in Germany and Central Europe will keep the sector out of a sudden decline.

Meanwhile, extraction of energy resources should see a slight turnaround, due to the drilling of new deposits of oil and gas. Pulp and paper should also expect a turnaround as increased demand in Germany is expected to increase overall demand in the sector.

Within basic chemicals, the decline of construction will likely lower demand for higher grades of certain gases. However, high demand for industrial gases and strength in petroleum refining, chemicals, electronics and some metals will help the sector.

Utilities, motor vehicles, auto parts, telecommunications and industrial process control equipment are experiencing either slow or negative growth.

Pharmaceuticals, which had not fallen into a decline during the 2001/02 slump, is expected to continue growing, but at a declining rate. Electronic components, medical equipment and optical instruments are also growing at declining rates.

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