European auto slowdown is cutting chemicals demand
Although the European economy continues to expand, the slowdown in the manufacturing sector is taking its toll on demand for chemicals, and some analysts forecast that long-term trends will only aggravate this.
The 19-country Eurozone is also suffering from a global slowdown in which Germany’s powerful export-oriented manufacturing sector has been hit. The US-China trade war has indirectly caused a slowdown for demand of German goods, with the automobile sector being the main exponent of that. Many chemicals produced in Europe – around 15-20% – are used in automobiles and any slowdown in the industry greatly affects chemicals and associated sectors.
Traditionally, car sales have been a good measure of consumer confidence, since car buying is boosted when economy, employment and wages grow. However, the sharp slowdown in the manufacturing sector in Europe in the one year is yet spill over to the predominant services sector. On average, services account for 80% of European GDP.
While a global recession is being mooted by some analysts, the European economy is still holding up, reducing painful rates of unemployment and increasing wages modestly. This would be key for the chemicals-intensive automobile sector, but as consumers become more aware about climate change, making sustainability a part of their daily lives, demand for new cars may continue to decrease.
