CECIMO Statistical Toolbox

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1 European Association of the Machine Tool Industries Where manufacturing begins In this edition: 0 Introduction 1 Machine tool orders 1.1 CECIMO orders 1.2 Peter Meier s forecast CECIMO Statistical Toolbox Janvier 2014 Edition 2 Macro-economic indicators in the EU & correlation with MT orders 2.1 GDP 2.2 Interest rates - Euribor 2.3 Industrial production index 2.4 Gross Fixed Capital Formation (GFCF) 2.5 Capacity utilisation in the invest. goods sector 2.6 Bank lending survey 2.7 Foreign exchange rates 2.8 Industrial employment 3 Business expectations 3.1 OECD Business Confidence Indicator for Europe 3.2 Purchasing Managers Index (PMI) CECIMO aisbl 66, avenue Louise 1050 Brussels Belgium Tel: Fax: For more information: information@cecimo.eu 4 MT-IX 5 CECIMO trade 5.1 CECIMO production 5.2 CECIMO Business Climate Barometer 6 European Commission economic forecast NB: only the highlighted indicators are available in this edition of the toolbox

2 order intake increased 2 and 4% compared to previous quarter and the same period a year ago respectively. This all strengthens European machine tool industry s outlook for Introduction (Glossary at the end of the document) The year started with positive news. In its latest Economic Outlook, the International Monetary Fund (IMF) raises its forecasts and estimates global growth to increase in 2014 after having been stuck in low gear in Global growth is expected to average 3.7% in 2014 up from 3 percent in 2013, and to rise to 3.9 percent in While the IFM raised the outlook for advanced nations, downside risks remain. The Fund warns that if the inflation is very low in advanced economies, especially the euro area, it could increase real debt burdens and raise real interest rates, hampering growth. In emerging market economies, increased financial market and capital flow volatility remain a threat. The combination of portfolio shifts resulting from fiscal tightening in the United States and Japan and domestic weaknesses could result in sharper capital outflows and exchange rate adjustments in emerging economies. On 1 January 2014, 15 years after the launch of the euro, Latvia joined the common currency area marking a milestone in European Monetary Union. After Latvia s adoption of the euro, 18 Member States and 333 million Europeans share the same currency. Latvia s population is around 2 million and its GDP accounts for about 0.2% of euro area GDP. The Latvian economy has been dynamic and real GDP grew by 4.1% year on year in the third quarter of Good growth is badly needed for further conversion to the euro area s core, because GDP per capita of the country is still slightly below 60% of the euro area average. Europe records increasing market confidence. December survey results show that sentiment in the euro area is back to its long-term average for the first time since July In the EU, the average had already been surpassed in September. The European industrial production increased an annual 3% in November. CECIMO s machine tool orders index confirm the gradual recovery. In the third quarter of 2013 European machine tools also feel the transformation of emerging economies manufacturing sector. Increasing labour costs push companies to look for more efficient machinery. In addition, the Chinese government s efforts to rebalance the economy towards consumption have led to tighter credit conditions that can be felt all over Asia. As a result, machine tool consumers in the region pay more attention to the productivity and quality of machines. On the other hand, the European machine tool sector is concentrated on the high precision, highly productive and recourse efficient machines. Therefore, CECIMO expects improvement of competitive stance of European machine tool industry in Asia and globally. This forecast is strongly supported by the estimated increase of CECIMO s share in the world production form 32% in 2012 to 34% in Interest rates EURIBOR In December, the 3-month Euribor and 12-month Euribor monthly average increased by 5 and 3 basis points respectively compared to the levels observed in November. The average 3-month Euribor recorded 0.27% and 12-month Euribor 0.54%. The latest upward trend of Euribor follows improving economic conditions in euro area. Both objective indicators, such as the GDP, and subjective indicators like business and consumer confidence confirm the gradual return of growth to Europe. Therefore, the ECB s decision to keep the interest rate on the main refinancing operations of the Eurosystem and the rate on the marginal lending facility unchanged seems logical under present circumstances. See glossary for definitions 2.3 Industrial production index In November 2013 compared with October 2013, seasonally adjusted industrial production grew by 1.8% in the euro area (EA17) and by 1.5% in the EU28, according to estimates from Eurostat, the statistical office of the European Union. In October industrial production decreased by 0.8% and 0.5% respectively. 2

3 Introduction The production of capital goods grew by 3.0% in the euro area and by 2.6% in the EU28. The production of durable consumer goods increased by 2.2% and 1.5% respectively. The production of energy rose by 1.8% in the euro area and by 1.2% in the EU28. The production of intermediate goods grew by 1.0% in the euro area and by 0.8% in the EU28. Among the Member States for which data are available, industrial production rose in sixteen, remained stable in three and fell in six. The highest increases were registered in Ireland (+11.7%), Sweden (+6.4%), Malta (+3.8%), Croatia (+3.0%), the Netherlands (+2.5%) and Germany (+2.4%), and the largest decreases in Lithuania (-3.5%), Denmark (-3.0%) and Greece (-2.2%). In November 2013 compared with November 2012, industrial production increased by 3.0% in both the euro area and the EU28. The production of capital goods rose by 4.4% in the euro area and by 4.7% in the EU28. The production of intermediate goods grew by 3.3% and 3.5% respectively. The production of energy decreased by 0.5% and 1.4% respectively. The production of durable consumer goods fell by 0.8% in the euro area and by 0.3% in the EU28. On yearly basis, among the Member States for which data are available, industrial production rose in nineteen and fell in six. The highest increases were registered in Ireland (+13.2%), Slovakia (+12.7%), the Czech Republic (+8.8%) and Romania (+8.7%), and the largest decreases in Malta (-8.6%) and Greece (-6.2%). See glossary for definitions 2.4 GFCF Gross fixed capital formation (GFCF) rose by 0.5% in the euro area (EA17) and by 0.7% in the EU28 during the third quarter of 2013 compared with the previous quarter, according to flash estimates published by Eurostat. In the second quarter of 2013, GFCF grew by 0.3% and 0.4% respectively. 6 fell by 1.9% in the euro area and by 1.0% in the EU28 in the third quarter of 2013, after -3.3% and -3.2% respectively in the previous quarter. During the third quarter of 2013, GFCF in Japan grew by 1.7% compared with the previous quarter (after +2.0% in the second quarter of 2013). Compared with the same quarter of the previous year, GFCF rose by 4.3% (after +0.7% in the previous quarter) in Japan. Swiss GFCF grew 0.4% in the third quarter of 2013 compared with the previous quarter. On yearly basis, GFCF increased 2.3% in Switzerland. 2.7 Foreign exchange rates The euro appreciated against the Japanese yen by 5.1% and against the US dollar by 1.5% in November. Over the same period, the euro depreciated against the Swiss franc by 0.6%. On 8 January 2014, the nominal effective exchange rate of the euro, as measured against the currencies of 20 of the euro area s most important trading partners, stood 0.4% above its level at the beginning of December and 4.5% above the level one year earlier. The euro area recorded an historical event: on 1 January 2014, Latvia adopted the euro and became the 18th member of the euro area. The conversion rate between the Latvian lats and the euro was irrevocably fixed at lats. Latvia is a very small economy compared with the rest of the euro area. As such, the country s adoption of the euro will have no significant impact on the euro area s aggregate macroeconomic data that provides a starting point for the Governing Council of the ECB in their decisions. We therefore expect current monetary policy to continue. 2.8 Industrial employment The number of persons employed remained stable in both the euro area (EA17) and the EU28 in the third quarter of 2013 compared with the previous quarter, according to national accounts estimates published by Eurostat. In the second quarter of 2013, employment was also stable in both zones. Compared with the same quarter of the previous year, seasonally adjusted GFCF 3

4 Introduction Compared with the same quarter of the previous year, employment fell by 0.8% in the euro area and by 0.3% in the EU28 in the third quarter of 2013 (after -1.1% and -0.6% respectively in the second quarter of 2013). Eurostat estimates that, in the third quarter of 2013, million men and women were employed in the EU28, of which million were in the euro area. These figures are seasonally adjusted. These quarterly data on employment provide a picture of labour input consistent with the output and income measure of national accounts. Among those Member States for which data are available, Portugal (+1.2%), Ireland (+1.1%), the United Kingdom (+0.6%) and Luxembourg (+0.5%) recorded the highest increases compared with the previous quarter, while Estonia and Lithuania (both -1.5%), Cyprus (-1.4%), Finland (-1.2%) and Greece (-0.7%) registered the largest decreases. 3.1 OECD Business Confidence Indicator (BCI) for Europe Business confidence indicators (BCIs), designed to anticipate turning points in economic activity relative to trend, continue to show signs of an improving economic outlook in most advanced economies. The BCIs point to economic growth firming in Japan and the United States. In the emerging economies, the BCIs point to a tentative positive change in momentum in China, to growth around trend in Brazil and Russia, and to growth below trend in India. In Europe as a whole, and in France and Italy, the BCIs continue to indicate a positive change in momentum. In Germany and in the United Kingdom, the BCI shows signs of firming growth. See glossary for definitions 3.2 Purchasing Managers Index (PMI) Manufacturing activity showed its fastest growth in almost three years at the end of 2013, fuelling hopes that the global recovery will accelerate this year. Global PMI rose to 53.3 in December, up from 53.1 in November expanding for the twelfth month in a row. The expansion was led by G7 developed nations. Among the larger emerging economies, the already muted rates of increase for production decreased in India and Russia, and remained similarly modest in Brazil and South Korea. The Chinese PMI fell to 50.5 in December from 50.8 the previous month, underscoring challenges for the country to sustain growth in the world s secondlargest economy, while rolling out reforms. Euro area manufacturing growth accelerated further. New orders were at a 30-month high and put the purchasing managers index at 52.7, up from 51.6 in November. Germany, Italy, the Netherlands and Spain were solidly in the growth zone. Only France moved to the opposite direction. Its PMI declined from 48.1 in November to 47 in December, indicating a further drop in exports. A strengthening upturn in the manufacturing sector is helping the euro area recovery become firmly established. The latest numbers are consistent with production growing at a quarterly rate of approximately 1% at the end of the year. It s also encouraging to see prices rising slightly, suggesting firms are seeing some improvement in pricing power. With producers reporting further growth of new orders, exports and backlogs of work, the stage is set for a good start to 2014, during which it seems likely that the manufacturing sector will help drive a meaningful, albeit still modest, recovery in the wider economy, commented Markit. See glossary for definitions 4 MT-IX The MT-IX recorded a modest 0.5% increase in December. The index gained 1 point compared to November s value, and posted at 209 points in December Market value of machine tool companies increased in South-Korea and Taiwan. European, American and Japanese machine tool companies booked more varied results. In total 13 companies out of 23 included in our index saw a decrease in their market capitalisation. See glossary for definitions * * * * * 4

5 2.2 Interest rates - EURIBOR 6% Euribor rate MT orders (100 = 2005) MT ORDERS 12M moving average 150 5% ECB refinancing rate 130 4% 12M EURIBOR quarterly average % 2% 3M EURIBOR quarterly average 90 1% 35% correlation between Euribor 12M & 12-month moving average of MT orders 70 0,53% 0,33% source: Euriobor.org + CECIMO 0,24% 0% 50 3Q13 1Q13 3Q12 1Q12 3Q11 1Q11 3Q10 1Q10 3Q09 1Q09 3Q08 1Q08 3Q07 1Q07 3Q06 1Q06 3Q05 1Q05 3Q04 1Q04 3Q03 1Q03 3Q02 1Q02 3Q01 1Q01 3Q00 1Q00 3Q99 1Q99 5

6 2.3 Industrial production index MT orders in CECIMO 8 (index 100 = 2005) A 88% correlation between industrial production and MT orders (12-month rolling basis) since Industrial Production - 12M moving average 100,2 100 MT orders - 12M moving average Source: Eurostat + CECIMO 40 13Q3 13Q1 12Q3 12Q1 11Q3 11Q1 10Q3 10Q1 09Q3 09Q1 08Q3 08Q1 07Q3 07Q1 06Q3 06Q1 05Q3 05Q1 04Q3 04Q1 03Q3 03Q1 02Q3 02Q1 01Q3 01Q1 00Q3 00Q1 99Q3 99Q1 98Q3 98Q1 97Q3 97Q1 96Q3 96Q1 95Q3 95Q1 94Q3 94Q1 93Q3 93Q1 92Q3 92Q1 6

7 2.4 GFCF 500 GFCF (Euro area 18 countries) in billion MT Orders (index 100 = 2005) Gross Fixed Capital Formation (billion ) 425,9 425, month rolling average of MT orders Q1 1995Q3 1996Q1 1996Q3 1997Q1 1997Q3 1998Q1 1998Q3 1999Q1 1999Q3 2000Q1 2000Q3 2001Q1 2001Q3 2002Q1 2002Q3 2003Q1 2003Q3 2004Q1 2004Q3 2005Q1 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 55 7

8 2.7 Foreign exchange rates 170 CECIMO Foreign Orders Index 169 1,7 Units per 1 EUR (quarterly average) 1,6 150 CHF 1, USD 100JPY 132 1,37 1,4 1,35 1,3 1,23 1,2 90 CECIMO Foreign Orders 1, ,98 0,9 50 Source: oanda.com + CECIMO ,8 8

9 2.8 Industrial employment MT orders, 2005=100 Industrial employment growth EU28, % MT orders , Industrial employment growth ,

10 3.1 OECD Business Confidence Indicator (BCI) for Europe MT orders (100=2005) Business Confidence There is 82% correlation between BCI Europe+ 6 months and smoothed MT Orders in CECIMO 8 since 2001 Business Confidence 3M average with +6 month time lag , MT Orders - 12M moving average Business confidence shows a long-term trend in industrial production (with a 6-month time-lag). An increase over 100 means expansion; a decrease above 100 means a downturn; an increase below 100 is an upturn and a decrease below 100 is a slowdown 92 90,2 90 source: OECD + national associations Q13 3Q13 2Q13 1Q13 4Q12 3Q12 2Q12 1Q12 4Q11 3Q11 2Q11 1Q11 4Q10 3Q10 2Q10 1Q10 4Q09 3Q09 2Q09 1Q09 4Q08 3Q08 2Q08 1Q08 4Q07 3Q07 2Q07 1Q07 4Q06 3Q06 2Q06 1Q06 4Q05 3Q05 2Q05 1Q05 4Q04 3Q04 2Q04 1Q04 4Q03 3Q03 2Q03 1Q03 4Q02 3Q02 2Q02 1Q02 4Q01 3Q01 2Q01 1Q

11 3.2 Purchasing Managers Index (PMI) - Global 145 PMI , ,3 52, Global 35 Eurozone USA -15 source: Markit Economics + National Statistics MT orders 30 11

12 3.2 Purchasing Managers Index (PMI) - Europe PMI ,3 53, ,3 52,7 50, Eurozone Germany Italy 33 Spain Switzerland source: Markit Economics 28 12

13 3.2 Purchasing Managers Index (PMI) - Asia PMI ,2 55, ,8 50,7 50, China 39 India Japan source: Markit Economics S. Korea Taiwan

14 4 MT-IX MT-IX (index 100 = January 2005) CECIMO MTIX MT orders (Index 100 = 2005) CECIMO orders There is a 68% correlation between MTIX 12 month moving average and CECIMO orders CECIMO MTIX 12-month moving average

15 back Glossary Interest rates - Euribor Euribor (Euro Interbank Offered Rate) is the rate at which euro interbank term deposits are being offered by one prime bank to another within the EMU zone Industrial production index The objective of the production index is to measure changes in the volume of output at close and regular intervals, normally monthly. It provides a measure of the volume trend in value added over a given reference period. The production index is a theoretical measure that must be approximated by practical measures. Value added at basic prices can be calculated from turnover (excluding VAT and other similar deductible taxes directly linked to turnover), plus capitalised production, plus other operating income plus or minus the changes in stocks, minus the purchases of goods and services, minus taxes on products which are linked to turnover but not deductible plus any subsidies on products received. The division of production in construction between building construction and civil engineering is based on the classification of types of construction (CC). Statistical population: Production: sections B, C, D of NACE (D353 excluded); Base period: Year 2005 = means expansion; a decrease above 100 means a downturn; an increase below 100 is an upturn and a decrease below 100 is a slowdown Purchasing Managers Index (PMI) The Global Report on Manufacturing is compiled by Markit based on the results of surveys covering 9,000 purchasing executives in 30 countries. Together these countries account for an estimated 86% of global manufacturing output. Questions are asked about real events and are not opinion based. Data are presented in the form of diffusion indices, where an index reading above 50.0 indicates an increase in the variable since the previous month and below 50.0 a decrease. 4 MT-IX MTIX is and index based on the capitalization of 23 leading, publicly listed machine tool producing companies. The capitalization of the companies included is weighted by the share of machine tool turnover in total revenues. The total capitalization calculated in that way is weighted then by and estimated share of the European companies in the world total output in OECD Business Confidence Indicator (BCI) for Europe The Composite leading indicators (CLI), which BCI is part of, comprises a set of component series selected from a wide range of key short-term economic indicators to ensure that the indicators will still be suitable when changes in economic structures occur in future. While theory says that a turning point in the CLI signals a turning point in the reference series, such turning points, in reality, are determined by a complicated process. Therefore, one often needs to wait for several periods to draw a more definite conclusion. A useful way to exploit the information in CLIs is to take their year-on-year growth rate. The standardised BCIs represent only the manufacturing sector. BCI shows a longterm trend in industrial production (with a 6-month time-lag). An increase over