EMEA Economic Insight November 2010


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Manpower EMEA Economic insight report looking at the stories behind the jobs economy

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EMEA Economic Insight November 2010

  1. 1. Manpower EMEA Economic Insight Issue 7. November 2010 EMEAMacroEconomicInsight EA16 and EU27 government deficit at 6.3% and 6.8% of GDP respectively. Government debt increases to 79.2% and 74.0% In 2009, the government deficit and government debt of both the EA16 and the EU27 increased compared with 2008, while GDP fell. In the EA16 government deficit to GDP ratio increased from 2.0% in 2008 to 6.3% in 2009 and in the EU27 from 2.3% to 6.8%. In the EA16 government debt to GDP ratio increased from 69.8% at the end of 2008 to 79.2% at the end of 2009 and from 61.8% to 74.0% in the EU. In 2009 the largest government deficits in percentage of GDP were recorded in Greece (-15.4%), Ireland (-14.4%), the United Kingdom (-11.4%), Spain (-11.1%), Latvia (-10.2%), Portugal (-9.3%), Lithuania (-9.2%), Romania (-8.6%), Slovakia (-7.9%), France (-7.5%) and Poland (-7.2%). No Member State registered a government surplus in 2009. The lowest deficits were recorded in Luxembourg (-0.7%), Sweden (-0.9%) and Estonia (-1.7%). In all, 25 Member States recorded a worsening in their government deficit relative to GDP in 2009 compared with 2008, and two (Estonia and Malta) an improvement. EA16 and EU27 GDP up by 0.4% GDP increased by 0.4% in both the EA16 and the EU27 during the third quarter of 2010, compared with the previous quarter, according to the latest estimates published by Eurostat. In the second quarter of 2010, growth rates were +1.0% in both zones. Compared with the same quarter of the previous year, seasonally adjusted GDP increased by 1.9% in the EA16 and by 2.1% in the EU27 in the third quarter of 2010, after +1.9% and +2.0% respectively in the previous quarter. During the third quarter of 2010, US GDP increased by 0.5% compared with the previous quarter, after +0.4% in the second quarter of 2010. US GDP rose by 3.1% compared with the same quarter of the previous year (+3.0% in the previous quarter). Industrial production down by 0.9% in EA16 and down by 0.5% in EU27 In September 2010 compared with August 2010, season- ally adjusted industrial production fell by 0.9% in the EA16 and by 0.5% in the EU27. In August 2010 production rose by 1.1% and 0.9% respectively. In September 2010 compared with September 2009, industrial production increased by 5.2% in the euro area and by 5.8% in the EU27. Construction output down by 2.1% in EA16, down by 1.7% in the EU27 In the construction sector, seasonally adjusted production fell by 2.1% in the EA16 and by 1.7% in the EU27 in Sep- tember 2010, compared with the previous month. In August, production decreased by 0.4% in the EA16 and remained stable in the EU27. Compared with September 2009, output in September 2010 dropped by 8.1% in the EA16 and by 3.6% in the EU27 EA16 annual inflation up to 1.9%, EU up to 2.3% EA16 annual inflation was 1.9% in October 2010, up from 1.8% in September. A year earlier the rate was -0.1%. Monthly inflation was 0.4% in October 2010. EU annual inflation was 2.3% in October 2010, up from 2.2% in September. A year earlier the rate was 0.5%. Monthly inflation was 0.3% in October 2010. Compared with September 2010, annual inflation rose in fifteen Member States, remained stable in six and fell in five. Unemployment remains static EA16 seasonally-adjusted unemployment rate was 10.1% in September 2010, compared with 10.0% in August. It was 9.8% in September 2009. The EU27 un- employment rate was 9.6% in September, unchanged compared with August. It was 9.3% in September 2009. Estimates show that 23.109m men and women in the EU27, of whom 15.917m were in the EA16 were unemployed in September 2010. Compared with August, the number of persons unemployed increased by 71,000 in the EU27 and by 67, 000 in the EA16. Compared with September 2009, unemployment rose by 0.656m in the EU27 and by 0.424m in the euro area. EA16 annual inflation up to 1.9%, EU up to 2.3% EA16 annual inflation was 1.9% in October 2010, up from 1.8% in September. A year earlier the rate was -0.1%. Monthly infla- tion was 0.4% in October 2010. EU annual inflation was 2.3% in October 2010, up from 2.2% in September. A year earlier the rate was 0.5%. Monthly inflation was 0.3% in October 2010. Compared with Septem- ber 2010, annual inflation rose in fifteen Member States, remained stable in six and fell in five. Retail volume trade down by 0.2% in EA16, down by 0.1% in EU27 In September 2010, compared with August 2010, the volume of retail trade decreased by 0.2% in the EA16 and by 0.1% in the EU27. In August retail trade fell by 0.2% in both zones. In September 2010, compared with September 2009, the retail sales index rose by 1.1% in the EA16 and by 1.3% in the EU27.
  2. 2. Manpower EMEA Economic Insight Issue 7. November 2010 Is this your copy of the Manpower EMEA Economic Insight? Email graham.murphy@manpower.com to subscribe EU contagion in the spotlight The finances of the Irish Republic are under major scrutiny after the country’s government and central bank finally accepted a European Union led bail-out, supported by the IMF. The exact figure is still to be determined but is expected to be in excess of €90bn. The so called “Celtic Tiger economy” was initially built around the property market, but since the start of the financial crisis in 2008, the construction sector has seen a dramatic fall in output. House price values are estimated to have fallen by between 50% and 60% and bad debts which primarily involved debts by construction developers have left the main Irish banking groups facing serious liquidity problems. Those liquidity problems were initially solved by part nationalisation of the banking sector but with the on-going problems in the economy, tax revenues have also taken a sharp decline. The revenue gap between Government spend and tax revenues is currently running at 12% of GDP with current figures this year showing that Ireland has a budget deficit equivalent to 32% of GDP. Due to these factors the Irish Government is now facing liquidity problems of its own. The three main Irish banking groups have wholesale debts amounting to €110bn, which are due for repayment in a little over three years. Without EU backing, this is unlikely to be rolled over and therefore would have placed even more pressure on the whole of the Irish economy. Coupled with the increasing likelihood of personal bad debt adding to the total debt mountain, confidence in the Irish economy is at a low point. However to try and stabilise the situation both the UK and Swedish Governments have offered direct loans to the Irish Republic. Further political problems may also be encountered as Ireland has a relatively low level of corporation tax (currently 12.5%) which French and German politicians claim give Ireland an unfair advantage in attracting foreign investment. Political pressure may be placed upon the Irish Government to revise upwards the corporate tax rate as a condition of receiving EU/IMF bail-out money, however the Irish Government has resisted calls to increase the rate so far. Several major corporations based in Ireland have also questioned the need to raise the corporation rate. But the current crisis in Ireland has placed more emphasis on the financial concerns about Europe’s other highly indebted countries. Greece has now announced their formal austerity budget plan which aims to cut the 2011 public deficit to 7.4% of GDP. After the €110bn bail-out that it received in May, this would mean a €5bn reduction on the projected 2010 deficit. Major cuts to health services and the defence budget are planned along with an increase in sales tax to 14% (from 11%). The third trance of the bail out money has been issued (worth €9bn) but despite the existing cuts the Greek Government has been told to broaden the tax base and eliminate further wasteful spending. The primary worry is that other indebted nations such as Portugal and Spain may also seek additional funding, but as bond yields have increased, any addition borrowing will prove to be much more expensive on the international money markets. This will just add to the existing debt burden, therefore the need to borrow from the newly established EU central fund may increase. Industrial relation problems will also hit Portugal this week as a general strike has been called for the 24th November in protest at major cuts to civil service pay and pensions. Therefore the outlook is far from clear at present. Disparity of holiday season A new report by the EU highlights the seasonal distribution of demand for tourism, with Europeans taking 46% of their holidays in Q3. This is one of the main challenges and also opportunities facing the European tourism industry. Extending the tourism season or spreading tourism activities more evenly throughout the year can significantly boost the sustainability and competitiveness of European tourist destinations as well as having a direct impact on the jobs economy for the tourism sector. EU27 surplus in trade in goods with the USA almost doubled in the first six months of 2010, deficit of €7bn in trade in services in 2009 The USA remains the EU’s largest trading partner for both goods and services, and there are also significant investment flows between the two part- ners. However, a steady decline of the share of the USA in total EU27 trade in goods has been observed over recent years. In 2000, the USA accounted for 28% of total EU27 exports, compared with 19% in 2009. The share of USA in total EU27 imports also fell over this period, from 21% in 2000 to 12% in 2008, before recovering slightly to 13% in 2009. Among the EU27 Member States, Germany (€30bn or 27% of EU exports of goods) was by far the largest exporter to the USA in the first half of 2010, followed by the United Kingdom (€18bn or 16%), France (€11bn or 10%), Italy (€10 bn or 9%), Ireland and Belgium (both €9 bn or 8%). Germany and the UK were the larg- est importers (€15bn or 18% of EU imports each), followed by the Netherlands (€13bn or 16%) and France (€10 bn or 12%). In the second quarter of 2010, the EU27 external current account recorded a surplus with the USA (€19.4bn), Switzerland (€9.6bn), Hong Kong (€5.7bn), Brazil (€5.2bn), Canada and India (both €1.8bn), and a deficit with China (-€31.5bn), Russia (-€13.0bn) and Japan (-€8.6bn). EMEAEconomicInsight
  3. 3. Manpower EMEA Economic Insight Issue 7. November 2010 EMEACountryInsight OECD Reports mixed speed recovery A recent report by the OECD points to a mixed speed economic recovery taking place with Europe, which was also the conclusion of the Q4 MEOS report released in September. Economic expansion is likely to continue in Germany and the resource rich Russia. However, there is likely to be a slowdown in France, Italy and the UK, the impact of which is likely to be felt in Q1/Q2 2011. Focus remains on unregistered workers Research by Visa Europe recently reported that the grey economy within Italy could account for as much as 22% of GDP. Unregistered work was particularly prevalent in the agricultural, construction and tourist sectors. Turkish officials have also recently released figures indicating that 39,000 employers have been fined in the last two years as a total of 850,000 people have been caught working on an unregistered basis. Russia: Confusion over pension age The Russian President has stated that there are no plans at present to increase the state retirement age in Russia. Currently the state retirement age is 60 for men and 55 for women. This follows earlier reports that the Russian Finance Minister is looking at raising the retirement age to 62 for men and 60 for women. POLAND: Changes to bank holiday rules Poland has announced an amendment to the Labour Code making January 6th a public holiday. The code has also been amended so that employers will also no longer be obliged to give employees an additional day off if future public holidays fall on a Saturday. The changes to the code come into effect in January 2011. SWEDEN: European jobs days organised for unemployed Sweden’s National Public Employment Service is currently organising a series of one-day workshop encouraging the unemployed to seek employment opportunities outside of Sweden. The workshops, run in conjunction with the European Job Mobility Portal, are initially targeting areas in northern Sweden where unemployment in some local areas is currently over 12%. Job opportunities are focused in Spain, Norway, the UK, Germany, and the Czech Republic. SLOVAK REPUBLIC Language skills updated The Slovak government has announced that English lan- guage will become a compulsory subject in all elementary schools. The change, which was originally announced in September, follows news that 50% of current job advertisements ask for English language skills. Netherlands: Pension agreement reached The Dutch government has been able to reach agreement with coalition partners to raise the state retirement age from 65 to 66. The new age limit will likely come into force in 2020. The initial idea was to raise the age in line with life expectancy but this has proved a step too far for some coalition partners. In another change to the Dutch pension regulations, a one year exemption is being introduced in 2011 so that pension funds can make the necessary changes to their equity base. The changes are necessary to ensure that premiums remain affordable following changes to how they are calculated in future. Without the extension pension levels would have been cut, indexation may have been removed or considerable increases to premiums would have had to be introduced. Bulgaria: Extension of free travel area The Bulgarian Government is looking to enter into negotiations to gain membership to the Schengen agreement. The agreement allows for borderless travel between the majority of EU member states. However several original EU members are opposed to Bulgarian entry in the near future. European pensions benefits New research reveals that nearly 50% of European workers would sacrifice pay for a higher pension contribution by their em- ployer, compared to only 13% who would give up some of their salary for extra holi- days. 7,500 workers from across Belgium, Denmark, France, Germany, Ireland, The Netherlands, Norway, Spain, Switzerland and the UK were surveyed for the Europe- an Employee Benefits Benchmark survey. UK Mixed reaction to migration report The latest Migration Advisory Committee report says that achieving the govern- ment’s target of reducing visas for skilled workers will mean thousands of fewer visas will be issued. Business leaders have expressed concern that changes do not damage the fragile recovery, which is partly dependant upon skilled migrants.
  4. 4. EMEAEmploymentInsight Manpower EMEA Economic Insight Issue 7. November 2010 Unilever puts sustainability at centre of new global business model. FMCG giant Unilever has revealed a new business model which puts sustainability at the centre of its global operations. During the launch of the company’s Sustainable Living Plan, Paul Polman, CEO, revealed plans to halve the environmental impact of its products while doubling sales over the next 10 years. Unilever made three overarching commitments to be achieved by 2020 and said it would produce an annual report on its progress towards achieving these goals of: •50% reduction in the environmental impact of its products in terms of water, waste and greenhouse gases. •Source 100% of its agricultural supplies from sustainable sources. •Improve the health & well-being of one billion people across the world. A number of other leading multinational companies have made similar sustainable impact commitments most notably WalMart, the world’s largest public corporation by revenue, which has introduced sustainability criteria as part of its official product-sourcing process. Earlier this month, Unilever reported profits of €1.35bn for the three months to the end of September 2010. Visit www.sustainable-living.unilever.com/the-opportunity for details Walmart seeks merger with Massmart. Walmart, the worlds largest retailer, has announced that they are in talks to buy Massmart, a South African wholesaler, for a reported $4bn. Massmart, with approx 250 stores, operates across Sub-Sahara Africa. In a separate announcement, Walmart’s UK operation, ASDA, announced expansion plans which could create in excess of 7,500 jobs. Toyota reports profits continue to soar Profits at Japanese carmaker Toyota have continued to soar, with second quarter earnings nearly doubling to 98.7bn yen. The company raised its profit forecast again, predicting earnings of 380bn yen for the full year. However Executive Vice President Satoshi Ozawa spoke of a “very tough busi- ness environment, characterised by the radically and seri- ously appreciated yen in recent months as well as the risk of slowdown in demand recovery in the both the United States and Europe.” Scania AB and MAN SE confirm merger option Commercial truck manufacturers Scania AB of Sweden and Germany’s MAN SE have confirmed that they are looking at a potential merger. Volkswagen AG, a major shareholder in both operations is believed to be active in the negotiations. Cost synergies, manufacturing processes and R&D operations are cited as the main reasons behind the exploratory talks. China’s C919 passenger jet wins first orders The Commercial Aircraft Corp of China (Comac) has taken its very first orders for the C919 passenger plane. The move could mark the start of a challenge to the dominance of both Boeing and Airbus who have virtual control of the commercial passenger aircraft industry sector. The company’s chief accountant, Tian Min, on announcing the order said: “In the future we expect to see 3,000 new planes in China and more than 30,000 new planes globally. So this is a very big market.” The C919 competes directly with Boeing’s 737 and the Airbus A320 with Comac expecting to sell more than 2,000 C919s over the next 20 years. According to recent estimates the highly competitive segment could be worth as much as $1.7trillion over the next 20 years. Comac expects to start building the aircraft next year, which is currently in the engineering development phase, followed by a maiden flight in 2014 with first delivery expected in 2016. The Comac news coincides with the launch of the new whitepaper by Manpower on the Chinese market. Manpower’s new Fresh Perspectives Paper: Winning in China: Building Talent Competitiveness, advises both foreign and Chinese private-owned companies on how to win the talent war. The paper is based on Manpower’s 2010 Foreign and Chinese Private-Owned Companies Talent Competitiveness Survey. Banco Bilbao enters Turkish banking sector. The Economist reports that Spain’s Banco Bilbao Vizcaya Argentaria has made its first large scale acquisition outside of the Spanish-speaking market. In early November Banco Bilbao announced that it was acquiring nearly 25% of Garanti, Turkey’s second-biggest bank. BBVA has launched a €5bn rights issue to help fund the deal. Visit www.manpower.com/research/research.cfm for details How will the changing world of work affect you? Watch out for the next MEOS Report which is released on 7th December.