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Manufacturing on the rise in Europe

01-11-2010
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European manufacturers are optimistic about their future prospects as capacity utilization and export orders continue to rise.

However, their increased optimism isn't shared by consumers, service providers or retailers, according to a monthly survey by the European Commission released recently.

The European Commission's overall Economic Sentiment Indicator, or ESI, rose to 104.1 from 103.2, the fifth straight monthly rise. The steady increase in the ESI above the average of 100 since it was first calculated in 1990 suggests the euro-zone economy will continue to grow in the months ahead.

The headline measure of industrial confidence rose to zero from minus 2 in September, driven by a sharp rise in total orders and export orders.

In a separate quarterly survey, the commission found that factories were operating at 77.6 per cent of capacity, up from 77.2 per cent in July, but still below the long-term average of 81 per cent.

"The stronger euro doesn't seem to have much of an impact yet, as export orders increased further to the highest level since the first half of 2008," says Peter Vanden Houte, an economist at ING Bank.

Another measure of the environment for manufacturers in the euro zone — the Business Climate Indicator — rose to 0.98 from 0.76, reaching its highest level since September 2007.

"The level of the indicator suggests that economic activity in industry will continue to recover in the coming months," the commission said.

Although manufacturers became more willing to hire workers, consumers became more fearful of losing their jobs over the next 12 months. As a result, the headline measure of consumer confidence was unchanged at minus 11 for the third straight month, while the headline measure for the services sector was unchanged at 8 and the headline measure for the retailing sector was unchanged at minus 1.

In the UK — which is outside the euro zone — consumer confidence improved slightly.

Manufacturers and retailers became significantly more upbeat, while service providers became much more pessimistic.

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