Industrial policy indicators and analysis

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1 Monthly note Industrial policy indicators and analysis June 2013 SPECIAL FEATURE: Bio-based sector achievements and further challenges, with focus on the Bio-based products Task Force Manufacturing production recovers slowly, but a weak demand hampers investments In October 2012, the EU adopted a new Industrial Policy Communication in order to favour a recovery of industrial investments and reversing the decline in manufacturing's share of EU GDP. This Communication identified four pillars for a reinforced industrial policy: 1. Innovation and investment in six priority action areas, 2. Access to internal and international markets, 3. Access to finance 4. Human capital and skills. This monthly note aims at monitoring market and policy developments in the EU and at assessing progress towards a stronger European Industry. Data contained in this edition of the note has been updated on the basis of availability by 4 July This note is prepared by Directorate General Enterprise and Industry - Unit A4 "Industrial Competitiveness Policy for Growth". This Special Feature is based on a contribution from Units F2 "Chemicals Industry" and F4 "Food and Healthcare industries, Biotechnologies" cies/industrialcompetitiveness/economiccrisis/monthly_notes_en.htm Industrial production seems to have started a slow recovery path after months of decline, but the situation remains serious as uncertainty persists. In April 2013, EU27 manufacturing production grew by 0.9% compared to March Production has not recovered completely from the downward trend started in February 2011, but it is approaching production levels in that period. Industrial confidence in the EU improved in June 2013, both compared to the previous months and June Domestic market conditions are still difficult. Real GDP contracted in the first quarter of 2013, albeit at a lower rate compared to the last quarter of Quarter-on-quarter GDP growth was negative in the EU27 by -0.1%. This outcome reflects a contraction in domestic demand in the first quarter of Net exports made a small positive contribution and exports to extra-eu partners continued to grow. The Task Force on bio-based products focuses on setting the framework for competitiveness The EU industry has already made significant investments in this extremely dynamic segment, but in a fragmented manner Europe needs to consolidate and capitalize its prominent knowledge base by creating framework conditions for industry to increase its investments. To foster the development of the bio-based products the task Force is promoting a cascading use of biomass, where products with higher value added should be produced first and biofuels at a later stage of the production chain. Policy instruments distorting the use of biomass incentivising biofuel production at the expense of the higher value added bio-based products should be avoided. Strong competition from third countries call for actions in the EU that ensure both efficient use of labeling and a wider use public procurement. Enterprise and Industry

2 1 Monthly developments in the EU 1 Manufacturing production recovers slowly, but a weak demand hampers investments Industrial production seems to have started a slow recovery path after months of decline. Nevertheless, the situation remains serious as dangers and uncertainties still persist. In April 2013, EU27 manufacturing production grew by 0.9% compared to March This figure is driven by strong growth in France (2.6%) and Germany (+1.5%) while production remains weak in Italy, Greece and Spain. EU manufacturing production has not recovered completely from the downward trend started in February 2011, but it is approaching production levels in that period. In April the year-onyear change was of -0.1%. Overall, manufacturing production in the period February April 2013 was 1.4% below the level achieved in the same period last year and 11.6% below the first quarter of improved but still difficult conditions in the manufacturing sector. GDP forecasts 2 based on the latter index present a negative outlook for the second quarter of this year (-0.3% in GDP with respect to the first quarter of 2013), whilst estimates based on industrial production show less adverse prospects for the GDP. Domestic markets conditions are still subdued. Real GDP contracted in the first quarter of 2013, albeit at a lower rate compared to the last quarter of Quarter-on-quarter GDP growth was negative in the EU27 by -0.1%. This weak outcome reflects negative developments in domestic demand, which contracted further in the first quarter of 2013 driven by a drop in investment. Net exports made a small positive contribution since they decreased less than imports (Graph 2). Graph 2 Real GDP growth and contributions Graph 1 EU27 Manufacturing and construction production indexes 125 Manufacturing output Construction output Source: Eurostat Source: Eurostat Industrial confidence in the EU improved in June 2013 after the gloomy April figures. Production expectations and order books suggest a slow recovery for the short term for the EU and the Euro zone. The Manufacturing PMI (Purchasing Managers Index) experienced a 3.4% monthly increase in May. At Member State level, the PMI shows contrasting trends. It has improved in Germany (49 in April to 49.4 in May, confirming the upward trend started last April) and in France, where it reached a value of 46.4 showing an almost 2% increase over April and registering its highest value since August Despite the positive trend, the Manufacturing PMI index still lies below the threshold of 50, indicating According to the ECB, world real GDP growth (excluding the euro area) is expected to speed up gradually over the short term, from 3.6% in 2013 to 4.2% in These forecasts are based on business sentiment and financial conditions improvements, and take into account downward risks due to a hard landing in China. Growth in emerging economies is expected to remain robust and to continue sustaining global demand. Indeed, exports have continued boosting the EU economy and particularly the euro area, outpacing the growth of imports I the first months of The role of external demand has strengthened since mid-2012, when internal demand slowed down (Graph 3). 1 Based on Eurostat and ECB Monthly Bulletin, June 2013 (cut-off date 20 June 2013) 2 Focus Europe. Deutsche Bank, June

3 Graph 3 External and intra-eu trade EU27 Bio-based products have the potential to substitute fossil-based products. They are neutral in terms of greenhouse gas and leave a smaller ecological footprint, i.e. they can generate less waste and use less energy and water. Less consumption of natural resources lowers production cost and is better for the environment. Box 1 Using biomass smartly Source: Eurostat, CPB World Trade Monitor The growing role of EU exports to the rest of the world is in sharp contrast with the declining value intra-eu trade that continues falling. A smart use of biomass should be based on sustainability, affordability and added value. Under this principle, biomass should be first used for food, then for high value added products (including re-use and recycling) and afterwards as a source for bioenergy and biofuels 3 (Figure 1). - Smart or Cascading Principle use of biomass The declining path of gross fixed capital formation in the EU, which started in the second quarter of 2011, was confirmed in the first three months of In the first quarter of 2013 the indicator was 1.4% lower than in the last quarter of 2012 and 4.6% lower than in the same quarter one year ago. EU investment in other machinery and equipment was relatively more resilient, showing a recovery in 2009 and However this trend has reversed since the end of last year, and in the first quarter of 2013 investment in machinery was 2.1% lower than in the precedent quarter. Compared to the first quarter of 2008 investment, in other machinery and equipment has decreased by 14.2%. Short term forecasts by the ECB predict that investment will stay weak for the greater part of 2013 due to low sentiment, low capacity utilization and fragile demand prospects. The ECB forecasts suggest that investment will start increasing in late 2013, supported by the gradual strengthening of domestic and external demand, the prolonged very low level of interest rates, the need to gradually replace the capital stock after several years of subdued investment and the strengthening of profit mark-ups. Nevertheless, the need for further corporate balance sheet restructuring and adverse financing conditions in some euro area countries and sectors is likely to continue delaying the overdue recovery of business investment. 2 Bio-based products The term "bio-based" refers in this context to products made from renewable raw materials such as plants and trees. It excludes food, traditional paper and wood products, and biomass as an energy source. Source: Bruton et al "Bio-refineries" use different feedstock and various technologies in an integrated manner to produce different industrial primary and end products following the cascading principle presented in the graph. Biorefineries are also part of the so called industrial cluster symbioses where one partner s by-product or waste constitutes the raw material for another partner s production process. An example is the Kalundborg Symbiosis 4 with more than 30 waste streams among partners. This paves the way towards the emergence of cross-sectorial innovative value chains that lead to resource efficiency in an increasing circular economy. To realize this potential, the markets for the new products must grow fast. This implies that they need to satisfy diverse end-user requirements at a competitive cost, and that their entire life cycle - from conception over production and transportation to waste needs to be environmentally friendly. 3 Several EP Committees have recently expressed support for this approach. 4 Per Moeller & Davide de Francisci (2013), Presentation at the 10 th SusChem Stakeholder Event, Brussels, May. 3

4 Perceived uncertainty about product properties and weak market transparency however hinder a fast take-up of those products. This is all the more regrettable, as Europe is well placed in this market area, building on a leading technological and industrial position. 2.1 Market size and potential There are no official statistics of bio-based products given their heterogeneity. Nonetheless, estimates suggest that in 2010 bio-based products accounted for 10% of sales within the global chemical industry 5, representing 125 billion dollars in value. However, the share could rise to as much as 20% depending on the development of technologies, feedstock prices and policy framework. Table 1 - Estimated turnover and employment in EU bio-based industries Forest Annual turnover in EU billion (EU-25) Employment 3-4 million industrial jobs, 16 million forest owners Fisheries and aquaculture Agriculture 168 billion (2009) 12,2 million (2009) Starch 7,5 billion Sugar 14 billion 28,000 employees and 161,000 beet growers Food 965 billion 4.4 million Pulp/Paper 375 billion 1.8 million Biofuels 6 billion Chemicals Bio-chemicals and bio-plastics 50 billion (2009) 150,000 (2009) Enzymes 0.8 billion Source: European Commission, European BIOPLASTICS, Based on an assessment presented in the recent Commission Communication on the bio-economy strategy 6, the segment of bio-based industries in the EU currently represents approximately 57 billion in annual turnover with 300,000 jobs involved. Biobased industries encompass as main categories: "Biobased lubricants, polymers, surfactants, solvents and chemical building blocks"; "Enzymes 7 " and "Biofuels", 5 McKinsey report mckinsey_feb_2009.pdf 6 COM(2012)60 "Communication on Innovating for Sustainable Growth: A Bioeconomy for Europe" 7 Often applied as "intermediate products" in the bio-based industries, enzymes are proteins that are used to "catalyse" certain chemical estimated respectively at 50 billion, 0.8 billion and 6 billion annual turnover. A study by Festel 8 assessing the percentage of all chemical sales based on industrial biotechnological processes estimates that around 6.2% of global chemical sales were industrial biotechnology based in It forecasts this share to rise to 22% by 2020, a compounded annual growth rate over the entire decade close to 20%. According to the Lead Market Initiative (LMI) Ad-hoc Advisory Group for Bio-based Products, the market share of bio-based products in the EU remains low or confined to specific market niches (Table 1). Other countries outside the EU are rapidly moving in and are overtaking the EU in terms of deployment of bio-based industries 9. As part of the Farm Bill, a Biobased Markets Program (the BioPreferred Program) introduced a mandatory Federal Government procurement preference initiative and a voluntary product certification effort in the US. The US Department of Agriculture identifies products with a minimum bio-based content offering tools to manufacturers and to Federal buyers to boost the purchase and use of these designated bio-based products. Certified products may display a bio-based product label. This programme creates incentives for innovation and product development for a fastgrowing sector means that European competitors do not find in the EU market. Europe is technologically well positioned to spearhead the switch to a low carbon society with strong agricultural, agro-food and forestry sectors and worldleading companies in the plant breeding, biotech and chemical/biochemical, engineering and energy industries. Although the EU industry has already started to make significant investments in bio-refineries - e.g. in France, Germany, Finland, Netherlands, Denmark, Italy, Spain this has so far been done in a fragmented manner. Europe needs to maintain its competitive edge by consolidating and capitalizing its prominent knowledge base and creating the necessary framework conditions for industry to increase its investments in Europe. In order to develop the use of bio-based products it is necessary to review identified market entry barriers: (i) measurement and communication of environmental reaction steps that are essential in the production process of biochemical or biofuels. 8 Festel, G. Presentation at the 4th Annual European Forum for Industrial Biotechnology & The Bio-based Economy Amsterdam, October 20, Taking Bio-based from promise to market. Measures to promote the market introduction of innovative bio-based products. A report from the Ad-hoc Advisory Group for Bio-based Products in the framework of the European Commission s Lead Market Initiative (2009) 4

5 benefits and product properties (need for life cycle assessment skills and data to prove economic, environmental and societal benefits); (ii) development of the raw material supply; (iii) scaling up from pilot to industrial scale production; and (iv) balanced regulations and political frameworks to develop a level playing field for biomass applications. BOX 2 - A CLOSE LOOK AT BIO-PLASTICS, ENZYMES AND BIO-SOLVENTS MARKETS The total European market for soap, detergents and similar products is about 30 billion % of the products include enzymes which are bio-based. Enzymes make it possible to reduce water and energy consumption in washing. EU is a leading producer of enzymes. There is a potential of increasing the use of enzymes in food, pulp and paper and textiles production. At EU level, tons of bio-plastics were produced in 2005 which represent a limited market share (0.1%). Although bio-plastics are at present "niche markets", a dynamic market growth is forecasted. Market shares were in the order of 1-2% by 2010 and are projected to increase to 2-4% by The current market share of bio-solvents in the EU is about 1.5%. However, bio-solvents produced from vegetable oils and from starch are progressively replacing petrochemical solvents. One of the main factors for their increased consumption is the EU legislation concerning the reduction of volatile organic compound emissions in the context of the air quality policy. Some estimations point at a potential share of approximately 12-40% of the solvents market. Packaging, healthcare sector disposables, detergents, hygiene products, cosmetics and paints are strongly influenced by health and environmental concerns and represent areas in which bio-based products could potentially reach a substantial market share. The sales of these products in the EU were roughly about 250 billion in 2005 and the healthcare sector is expected to grow due to population ageing. Industry needs include among others: access to funding, technology transfer and development of strategic partnerships. Furthermore, perceived uncertainty about product properties and weak market transparency hinder the fast up-take of these products. The uncertainty about environmental benefits and product properties sometimes restricts market penetration. Therefore, the acceptance and commercial adaptation of biobased products can be improved by awareness raising, standardization and labeling. 2.2 Policy initiatives to foster the development of bio-based product markets The European Commission s Lead Market Initiative (LMI) for Bio-based Products aimed at fostering demand-side innovation policy measures such as regulations, standardization and public procurement during the period. The LMI identified a lack of European standards for bio-based products, in particular the determination of bio-based content as well as other product characteristics, e.g. functionalities, the evaluation of environmental impact, etc. A Bio-based Product Task Force has been set up in the framework of the revised Industrial Policy Communication. 10 The Task Force is supported by a Commission Expert Group for Bio-based Products. In addition, a Bio-economy Panel has been set up by the Commission Directorate General for Research and Innovation in the framework of the Bio-economy Strategy and Action Plan. The Panel aims at fostering interaction and coordination among different policy areas, sectors and stakeholders in the bio-economy. The main aims of the Task Force and the Expert Group are: To ensure the implementation of the recommendations from the Ad-hoc Advisory Group within the LMI for Bio-based Products To ensure that the bio-economy strategy covers the whole value chain from research to market, from biomass to bio-based products and considers the specific needs and contributions of the biobased products sector To achieve these objectives the Task Force has launched various actions. A few of them have already been completed, such as: 1. Inform public procurement authorities about bio-based products, their availability and capabilities building upon available standardization documents. 2. Contribute to a JRC report on market data for bio-based products generation with input from the Renewable Raw Materials Group (RRM) Establish a European Bio-economy Information System and Observatory (Bioeconomy Observatory) in collaboration with the Joint Research Centre. 10 COM(2012) 582 final, A Stronger EU Industry for Growth and Jobs. 11 "Bio-economy and sustainability: a potential contribution to the Bio-economy Observatory". JRC, Scientific and Policy Reports,

6 Other actions are currently underway and will be completed by the second semester of 2014: 1. Generate general recognition of the cascading (or pyramidal) use of biomass at EU level. The Task Force is driving this discussion at institutional level and in other forums (e.g. the Chemical Industry Roundtable in June 2013). The Commission s recently published Renewable Energy Progress Report 12 that recognizes a need for coherence of policies, since there is currently a significant detrimental impact from the use of biomass for biofuels and bioenergy rather than for high value-added products Contribute to the set-up of the Bio-Based Industry Public Private Partnership (BRIDGE PPP) in the framework of Horizon 2020 as a Joint Technology Initiative (JTI) including an effective link with the SPIRE PPP as a contractual PPP. Concrete work in the PPPs is expected to start in Perform first steps towards the establishment of new exemplary CN and PRODCOM Codes for bio-based lubricants, succinic acids and 1,4- butandiol. 4. Continue to develop and apply clear and unambiguous European and international standards 14. Promote and use harmonized certification and labeling schemes for bio-based products. Standardization is in progress for the development of a standard for measuring the bio-based content. Separate standardization mandates were issued and are on-going, among others, for the elaboration of a standardization program for bio-based products, for bio-based polymers, lubricants, solvents and surfactants and for the development of horizontal standards for bio-based products 5. Contribute to the discussion on the amendment of end-of-waste criteria allowing bio-based polymers to enter all waste collection and recovery systems, including composting, recycling and energetic recovery. 6. Contribute to future acceptance of bio-based products for their use in sustainable construction. In this respect a link between the different Technical Committees (construction and bio-based products) at CEN is currently being established. 7. Raise awareness on the possibility of using biobased lubricants including hydraulic fluids in environmentally sensitive areas. 8. Design and implement a communication strategy involving all partners in the value chain and all other stakeholders to achieve coherent messages on bio-based products. 9. Contribute to the on-going supply of sustainable biomass predominantly EU origin - for bio-refinery operations. 10. Prepare a compilation of product lists and databases of available bio-based products. 11. Raise awareness of contracting authorities in all EU Member States on the availability and capabilities of bio-based products allowing for possible use of bio-based products in tender specifications by exchanging also best practices across Member States. 2.3 Expected policy impact Policy instruments used in an attempt to foster the development of biofuels could introduce distortions in the use of the biomass. An optimal exploitation of biomass would require using it for high-value purposes (e.g. bio-based products) first, and then used as biofuel at a later stage of the production chain. However, where production of biofuel is subsidized, biomass is directed towards that use, at the expense of production of bio-based products. Pursuing the development of European level standards on bio-based products is one of the most important objectives of the Task Force. Standards for bio-based products can help increase market transparency by providing common reference methods and requirements in order to verify claims about these products (e.g. bio-degradability, bio-based content, recyclability, sustainability). The ongoing standard definition by CEN can play a key role by providing market players with a complete description of the product. 12 COM(2013) This issue should also be tackled through the integration of relevant sustainability criteria for the generation and end-use of solid biomass into the Renewable Energy, Biofuels and Bio-liquid Directives, which will be soon tabled by the Commission 14 Bio-based standardisation issues have been an object of a fruitful collaboration between EU and US. Under the framework of the Trans- Atlantic Economic Council, the EU-US Innovation Partnership included a topic on bio-based products. A specific activity on the harmonisation of standards for bio-based products was included under this topic in An excellent exchange of technical information between the partners led to the harmonisation of standards, based on the European technical work, in the first half of Custom Nomenclature (CN) and PRODCOM Codes will allow monitoring economic and market developments, as well as the verification of product capabilities for labeling and public procurement purposes. The actions of the Bio-based Products Task Force are expected to pave the way towards cross-sectorial innovative value chains. The five demonstration value chains currently being proposed as part of the BRIDGE PPP should become examples of good practice. 6

7 Coherence of EU policies is a long-term issue in this area of industrial policy. The Task Force has accordingly contributed to set up the Bio-economy Panel and has established the Commission Expert Group for Bio-based Products as a sectoral group which will feed in into the work of the Bio-economy Panel. Economic analysis suggests that the successful implementation of both supply and demand-side innovation policy measures could have a significant impact on prices and turnover of the involved industries. 15 Further reliable statistical data is needed. The Renewable Raw Materials (RRM) Group and the Bio-Observatory are currently working on gathering more market information. A first update is expected to be available by the end of Summary and Conclusions The segment of bio-based industries in the EU currently represents approximately 57 billion in annual turnover with 300,000 direct and indirect jobs. To promote the development of this extremely dynamic segment the Task Force is supporting a smart "cascade" use of biomass. Under this principle, biomass should be first used for food, then for high value added products (including re-use and recycling) and afterwards as a source for bioenergy and biofuels. Pursuing the development of European level standards on bio-based products is one of the most important actions of the Task Force. Standards are key for the future as they facilitate labeling and procurement processes and set the scene for creating competitive advantages. Strong competition from third countries call for actions in the EU that ensure both and efficient use of labeling and a wider use public procurement. The potential for the development of the bio-based product sector is set through different policy initiatives at EU-level (Lead Market Initiative, Bio-economy Strategy and Action Plan, Industrial Policy Update, etc.). Next steps should aim at ensuring a sustainable biomass supply at a competitive price as well as the industrial up-scaling in diversified and integrated biorefineries. 15 For instance, it has been estimated (in the context of the RM group) that the European market volume for bio-lubricants could increase from an expected 650 million euros in 2020 without any policy intervention to circa 800 million (and possibly to 1.1 billion if policy recommendations are implemented). 7

8 Glossary of terms Bio-based economy: A public goods-oriented biobased economy based on production paradigms that rely on biological processes and, as with natural ecosystems, use natural inputs, expend minimum amounts of energy and do not produce waste as all materials discarded by one process are inputs for another process and are reused in the ecosystem. Bio-based products: Products are made from renewable biological raw materials such as plants and trees. Bioeconomy Information System and Observatory (Bioeconomy Observatory): The Bioeconomy Information System and Observatory (Bioeconomy Observatory) has been established in collaboration with the JRC. The Observatory, building on existing information systems, will perform EU capacity mapping, technology watch, bioeconomy policy outlook, and market monitoring in various areas related to the bioeconomy, as well as forward looking analyses at EU and world-wide levels. Biorefineries: Biorefineries like oil refineries use different processing steps transforming diversified types of biomass via integrated processing approaches into different industrial products. BRIDGE PPP: BRIDGE stands for Bio-based and Renewable Industries for Development and Growth in Europe. It is a Public Private Partnership (PPP) on biobased industries being established in cooperation between the European Commission and bio-based industries. CEN: European Committee for Standardization. Custom Nomenclature (CN): The CN is a method for designating goods and merchandise which was established to meet, at one and the same time, the requirements both of the Common Customs Tarif and of the external trade statistics of the Community. The CN is also used in intra-community trade statistics. Industrial cluster symbioses: A network of industrial production sites where one partner s by-product and/or waste is the raw material in another partner s industrial production site. Lead Market Initiative (LMI): The Lead Market Initiative is the European policy for six important sectors that are supported by actions to lower barriers to bring new products or services onto the market. The European Commission, Member States and industry work together to carry out the action plans for the six Lead Markets. The policy instruments deal with regulation, public procurement, standardisation and supporting activities. The LMI identified the following markets: e-health, Protective textiles, Sustainable construction, Recycling, Bio-based products and Renewable energies. PRODCOM: EUROSTAT s Production Statistics PRODCOM provides statistics on the production of manufactured goods. The term comes from the French "PRODuction COMmunautaire" (Community Production) for mining, quarrying and manufacturing: sections B and C of the Statistical Classification of Economy Activity in the European Union. Public Private Partnerships (PPPs) SPIRE: A proposal for a Public-Private Partnership (PPP) dedicated to innovation in resource and energy efficiency and enabled by the process industries. Its objective is to develop the enabling technologies and solutions along the value chain, required to reach long term sustainability for Europe in terms of global competitiveness, ecology and employment. Renewable raw materials: Renewable raw materials come from renewable resources including vegetable oil, starch, sugar and cellulose can be converted, using different technologies, into a range of bio-based products. These include biopolymers, bio-based lubricants, bio-based surfactants, speciality and platform chemicals, composites and construction materials. 8

9 4 Annex I Bio-based products Estimated Market Capacity Development Bio-products Market volume "Bio" 2010 (in tons) Projected market volume "Bio" 2020 (in tons) Short-life/Disposable applications (PLA, PHA, Starch Blends, Cellulosics) Bio-based plastics (figures by European Bioplastics) Durable applications Engineering Polymers Modified PLA, Cellulosic Polyolefin (2012) Starch based alloys not marketed TOTAL Biodegradable and bio-based plastics (figures by BASF SE) Waste & Shopping bags Tableware Bio mulch for agriculture TOTAL Bio-lubricants (2008) (figures by Fuchs Petrolub AG) Hydraulic Fluids Chainsaw Lubricants Mould Release Agents Other oils TOTAL Compression moulding: - with natural fibres Bio-composites (figures by nova- Institut, 2012) - with cotton fibres with wood fibres Extrusion and injection moulding Bio-solvents (figures by Industries & Agro- Resources IAR) Wood Plastic Composites: with natural fibres TOTAL TOTAL (2012) Bio-surfactants (figures by Industries & Agro- Resources IAR) TOTAL (2012) Source: Busch & Wittmeyer, Current market situation 2010 and market forecast 2020 for bio-based plastics 9

10 5 Statistical annex 3.1 Reference values for 2020 (%) Share of manufacturing as % of GDP 20 Gross fixed capital investment as % of GDP 23 Investment in equipment as % of GDP 9 Trade in goods in the internal markets as % of GDP 25 Extra-EU exporting SMEs (% of total) 25 Source: European Commission, Industrial Policy Communication Update COM(2012) 582 final 3.2 Main Indicators Manufacturing value added (% of total VA) Quarter I 2013 Changes in percentage points compared to: Quarter IV 2012 Quarter I 2012 Pre-crisis peak Quarter I 2008 EU EA Gross fixed capital investment (% of GDP) EU EA Investment in other machinery and equipment (% of GDP) EU EA Source: Eurostat 3.4 Production and competitiveness Manufacturing Production Index 2010=100 Changes in percentage points compared to: Quarter I 2013 Quarter IV 2012 Quarter I 2012 Pre-crisis peak Quarter I 2008 EU EA Quarterly labour productivity EU EA Value added Manufacturing Business services All NACE activities Source: Eurostat 3.5 European economic forecast, Spring 2013 Percentage change on preceding year Gross Domestic Product EU EA Total Investment EU EA Investment in equipment EU EA Source: European Commission, European Economic Forecasts, Spring 2013 (a) 10

11 3.6 Business confidence Index Changes in points compared to June 2013 May 2013 June 2012 Pre-crisis March 2008 Industrial confidence EU27-11,3 1 0,3-12,8 EA17-11,2 1,8 1-12,6 Production expectations EU27 1,8 1,1 4,4-9 EA17 0,7 2,6 5,6-8,7 Assessment of stock levels EU27 7,8 0,5-0,2 0,9 EA17 5,9-0,2-1 -0,7 Assessment of order books EU27-28,1 2,3-3,9-28,7 EA17-28,5 2,5-3,8-30 Source: DG ECFIN, Consumer and Industry Survey 3.7 Foreign trade Trade in services as a % of GDP Value of Extra EU-27 Exports as % of GDP Goods Services Source: Eurostat 3.8 Intra-EU trade Intra-EU imports of goods as a % of GDP Trade in services as % of GDP Total trade in goods (all products) % of GDP Patents applications per million habitants Source: Eurostat 3.9 Lending conditions (net percentages of banks contributing to tightening credit standards) st Q th Q st Q Pre-crisis peak st Q EA Source: European Central Bank 3.10 Loan flows in billion euros (three months total) Apr 2013 Mar 2013 Apr 2012 Pre-crisis March 2008 EA Source: European Central Bank 11

12 6 METHODOLOGY This outlook takes into account the most recent macroeconomic information and the domestic and international market developments and expectations. Data is subject to retrospective review. SOURCES EUROSTAT Quarterly data European Central Bank (ECB) Monthly Bulletin, Survey on the Access to Finance of Small and Medium-Size Enterprises DG ECFIN European Economic Forecast Spring 2013 and Consumer and Industrial Survey 12

13 This note has been drafted by Cesar Roa and Beatriz Velazquez DISCLAIMER: While all efforts are made to reach robust estimates uncertainties on results may still remain. This publication does not necessarily reflect the official opinion of the European Union. European Union, Reproduction authorized provided the source is acknowledge 13