31 July 2018
Bob Cunneen, Senior Economist and Portfolio Specialist
European industrial production
Sources: Eurostat and Thomson Reuters Datastream.
European industrial production has improved over recent years. For the year to May, production has increased by 2.4%. However this broad measure of European economic activity camouflages the wide divergence in performances across the continent. This sharp activity divergence over the past decade shows the fault lines in Europe’s bold experiment of monetary integration.
Germany has been in the fast lane on the Autobahn highway system since the ‘Global Financial Crisis’ (2007-2009) and ‘Europe’s Sovereign Debt Crisis’ (2011-2012). Germany’s industrial production is a healthy 13% above 2007 levels (black line). By contrast, France (blue line) has been struggling in the slow lane with production still 7% below 2007 level.
Italy seems to be in the ‘break down lane’ with its industrial production levels still 16% below 2007 levels (red line). The sweet life for Italy (‘La Dolce Vita’) has turned sour given low business investment, high government regulations and a weak banking system that has constrained economic activity. This economic weakness also accounts for the emergence of the two populist political parties in the Five Star Movement and Lega parties who have now formed a coalition government in Italy that is causing consternation across Europe.
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