Surveys show a bad European economy for 2005

Recent surveys indicate the prospects for Europe’s economy in 2005 are not good. The CBI’s industrial trends survey shows that manufacturers’ order books have slipped to their lowest level since last January, citing a decline in demand for capital goods, plant and machinery.

The head of economic analysis at the CBI, Doug Godden, said: “High oil prices and only moderate growth in the US has produced weak demand from home and abroad and that is clearly hampering the manufacturing recovery.”

The CBI revised down its forecast for expansion in 2005 to 2.5% from 2.8%.

In Germany, the Institute for Economic Research’s monthly business climate index – the Ifo – says manufacturing, construction, retailing and wholesaling in Germany has declined. Economist Andrij Halushka said: “Germany’s business expectations for the next six months worsened again and in addition to Germany’s structural problems, the high price of oil and the stronger euro have started to bite.”

The euro jumped to a record high of US$1.3237 last week on suggestions the US is happy with a weak dollar. Until raw material prices fall, the US economy picks up and the dollar strengthens, Europe’s manufacturers are in for a tough time.