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Bad economic times are getting worse. The Eurozone’s factory production rose 0.8 percent in May from April as the U.K.’s economy crept back after contracting in April.
However, the greater factory output was largely due to a 13.9-percent burst in Irish output by U.S. companies operating there. The increase was attributed to the full restoration of access to health services, which had been curtailed for two years during the COVID crisis.
The spurt accounted for 51 percent of the region’s increase. Production gained a fraction in Germany but slipped in France, Italy, and Spain.
Britain’s and Europe’s economies grew in this year’s first quarter, while the U.S. GDP shrank.
Now, soaring energy prices—especially due to Russia’s war in Ukraine and related Western sanctions—threaten to send the region’s economies into negative numbers.
“The main things you have to pay for are a roof over your head, gas, water, and food,” one Brit told The Wall Street Journal. “Everything else is a luxury.”
Earlier this month, Russia shut down its Nord Stream 1 pipeline for “routine maintenance.” The pipeline brings Europe the bulk of its Russian natural gas imports, which accounts for as much as 40 percent of the continent’s gas supply.
Many fear that Russia will not reopen the pipeline as retaliation for European sanctions against Russia for its attack on Ukraine, as we reported in “New World Disorder Top Trend: Germany Rations Power as Russia Cuts Gas Supplies” (12 Jul 2022).
If gas supplies fail to resume and rationing results, Germany’s economic activity will decrease by 3.25 percent from this year’s third quarter through the second quarter of 2023, the country’s central bank has estimated.
The economic damage could be as much as a 9.9-percent loss of output if the gas shutdown is complete and prolonged, according to a recent study by several German economic institutes.
TRENDPOST: In 2021, factories burned about 36 percent of Germany’s natural gas and households 31 percent, analysts at JPMorgan Chase calculated.
Half of that gas came from Russia, with the proportion falling to 35 percent in the first four months of this year as Russia cut deliveries following sanctions imposed upon them by the U.S. and EU nations. (See “Will Surging Gas Prices Sink U.K, E.U. Economies?” in our 21 September, 2021 issue.)