Economic quarterly report

The second quarter of 2011 has seen sluggish growth in the EU economy, compared to the first three months of the year.

The European economy started to recover in 2010 after more than a 4% decrease in 2009. In 2010, EU Gross Domestic Product (GDP) reached 12 270 billion euros (11 781 billion euros in 2009). During the first quarter of 2011, GDP fell only in Cyrus (-1%). Overall, more robust growth trends were seen in both the EU and the euro-area (EU17), with a growth of 2% and 1% respectively.

During the second quarter of 2011, positive trends were registered in twenty-two European countries with major growth registered in Estonia, Latvia, Hungary and Romania (3%), Bulgaria (4%) and Lithuania (5%). A quarter-based recession was observed in Portugal (-1%) and the UK (-3%).

Overall, during the second quarter of 2011 the EU’s GDP grew by 0.1% but only by 0.5% in the euro-area. In terms of GDP components, there has been a decrease in private and public consumption on the one hand, and in investments on the other. The trade balance remained stable during the second quarter.

Accordingly, and as estimated by EUROSTAT, in June 2011, the volume of EU industrial production registered a drop of -3% and -2.7% in the euro area against March 2011. Compared to the same period of 2010, positive yearly trends in industrial production can be observed in both the EU27 (2.7%) and the euro area (3.6%). Moreover, in June 2011, compared to May 2011, seasonally adjusted data showed a fall of 1.6% in the production of capital goods in the euro area and by 2.6% in the EU27. Intermediate goods decreased by 1.3% (EU27) and by 0.7% (euro area). The production of energy grew by 1.7% and by 1.1% respectively.

The index of new orders in the manufacturing sector (including both domestic and non-domestic orders grew by 6.2% in June 2011 when compared to May 2011, and grew by 9% when compared to June 2010.

With regard to the EU’s construction activity, the latest estimations from EUROSTAT show a 1.1% rise in EU construction activity during the second quarter of 2011. Taking into account the euro-area (EU17), a growth of 0.8% was registered. When compared to the same quarter of the previous year, the EU27 and the euro area showed –3.0% and -3.5% growths, respectively.

These are the first signs of stabilisation in the EU construction industry after a two-year continuous drop until March 2011. During the second quarter, construction activity grew despite the fall in the EU’s industrial activity overall.

EUROSTAT’s monthly estimations showed a 2.6% growth in the EU27 and a 1.1% increase in the euro area in June 2011 compared with May 2011. Large differences in construction output could have been observed amongst different

European countries. Out of the nineteen countries with available data, thirteen performed positively and six performed negatively: the highest growth rate was registered in Romania while Belgium performed worse than other countries.

First official estimates showed positive results in cement manufacturing. The index of cement manufacturing has shown a positive trend since the beginning of 2011. However, in June 2011 cement remained at a lower level when compared to June 2010.