The U.S. Fed has just released its November industrial data (see Cliff Waldman’s comment) while the Eurostat published similar statistics on Europe’s manufacturing output for October late last week. The contrasts between these two reports could not be starker: America’s manufacturing is clearly on the mend whereas Europe’s industrial landscape continues to sag.
While in November, industrial production shot up 1.1 percent in the U.S., in October, the equivalent measure dropped 1.1 percent in the Eurozone. Over the span of five months (since June), the U.S. industrial sector outperformed that in the Eurozone on all fronts: output, value-added, profits, employment, and forward-looking sentiment. Most tellingly, the Eurozone’s production of capital goods fell 2.0 percent compared to a rise of 1.2 percent in the United States—a difference that hints at longer-lasting differentials in capital formation and hence medium-term growth.
Not all is bleak in Europe. Industrial output in two of the EU’s Big Six economies (UK and Poland) is now running 3-4 percent above last year’s levels. Portugal’s manufacturing is expanding at a similar clip while Czech industry is growing upward of 6 percent on an annual basis. Except for Portugal, the other economies enjoyed robust monetary support if only modest (or negative) fiscal impulse. Unfortunately, the policy outlook for the Eurozone remains blurry just when it begins to clear up here at home, as Cliff cogently made clear in his note. This points to yet another transatlantic divergence in the months ahead.