Saturday, 17 August 2013

Manufacturing in Euro Area: where are we production and employment-wise compared to 2008 ?

August, thankfully, is as slow a month as it gets. Hence not many people will be reading my posts (not that they do anyway). So, the brave souls who defy the boredom that my blogging causes to most people, will be treated with another manufacturing-related post.

For most countries and sectors, late 2007 – early 2008 was the peak of activity before the Great Recession set in. Hence I find it quite interesting to take a look at where does manufacturing production and employment for Euro Area countries stand today compared to early 2008.

In the current post I have included some randomly (or maybe not so randomly) selected Euro Area countries which I have divided into three separate groups: periphery, core and countries whose production currently is at a higher level than that of early-2008.

As far as data are concerned I used monthly data for production volume despite the “noise” they contain (I know all these fluctuations in charts are visually unappealing). The reason for that was that I wanted to have as recent a picture as possible (and Q2 data were not available) so please forgive me for that choice. Coming to employment, I used quarterly data, since monthly were not available. And that is it, let the charts roll.

First let’s take a look at peripheral countries.

source: Eurostat, own calculations

Greece and Spain have fared equally bad these past 51/2 years with the production’s trajectory being different though. Greece’s manufacturing sector, being more inward-looking, proved relatively more resilient in the 2008 crush but found it more difficult to form a base in the coming months for the exact same reason.

Out of the four southern countries, the Portuguese manufacturing sector performed relatively better.

Coming to the core countries (where for some reason I have included France as well) we can see that Finland’s underperformance is striking.

source: Eurostat, own calculations

When it comes to underperformance, France is a close 2nd. What is noteworthy is the fact that the Finnish, German and French manufacturing sectors were the hardest hit in the 2008 debacle, with the German manufacturing recovery standing out. 

There is a small group of countries where production currently stands at a level higher than that of early-2008, namely, Belgium, Ireland and Slovakia. 

source: Eurostat, own calculations

Production-wise, the Irish manufacturing sector proved to be the most resilient among those pictured, if we judge by the magnitude of the 2008 dip. Slovakia’s production plummeted deeply and abruptly to recover swiftly (in line with Germany) afterwards. 

Now let us have a look at how manufacturing employment fared.

source: Eurostat, own calculations

As expected, Greek manufacturing has shed the most jobs, followed by Spain and Italy is the most resilient of the bunch.

source: Eurostat, own calculations

Moving over to the core now, employment in Germany has recovered almost to the pre-crisis levels. On the other hand, in Netherlands, although production is almost at the early 2008 levels, employment is far softer.

Finally let’s see how employment is behaving the best-performers group. Unfortunately, data for Belgium are not available.

What could perhaps come as a surprise to some is that employment in both Ireland and Slovakia is significantly below the early 2008 level.

source: Eurostat, own calculations

To wrap things up, even core countries could be divided into soft-core and hard-core (if you will allow me to coin them that), with the hard-core group’s ranks thinning. Performance in Austria and Germany is relatively good, both production-wise and employment-wise, while Finland and France have not fared that well. Netherlands is doing ok as far as production is concerned but definitely worse if one looks at employment. The picture for peripheral countries is outright miserable and what one should realistically hope and anticipate is the moment when production and employment will bottom. Production in Greece appears to be forming a base but employment does not, nor does in any other of the peripherals. The “shocker” (insert irony here) is that employment is weak even in the few countries where production currently is at higher levels than 2008. All in all, there’s not much hope for employment in the tradables either…

P.S. If someone thinks that the reason for employment’s behavior in seemingly better-performing countries is a masked fall in turnover, think again, turnover sits higher than early-2008 as well.