September 2022: Significant downturn as predicted
The European Foundry Industry Sentiment Indicator (FISI) decreased by 2.6 points in September and reaches a value of 104.0 points. This marks the lowest index value in the last 21 months, while it is the sharpest month to month decline since March 2020. Both the expectations for the next six months and the assessment of the current business situation dropped significantly. The exceptionally strong drop is also characterised by the fact that the ratings point in the same direction across all metals.
While European leaders continue to disagree on measures to support industry and the future of energy procurement, an act of sabotage happened on the Nord Stream pipeline. Although the incident at the end of September does not affect energy supply at the moment, as supply from Russia had already been cut off before, it nevertheless reveals the vulnerability of critical infrastructure in Europe. However, this has had no impact on the assessment of the business climate, nor has the latest escalation in the war in Ukraine in September.
While high order stocks continue to support European foundries, more and more companies are confronted with the massive increases in energy costs. Although markets are now easing from the significant price spikes, the level is still well above the previous years. Policy makers would do well not to use the summer’s record prices as a benchmark if they want to avoid bleeding the European industry dry.
Meanwhile the Business Climate Indicator (BCI) decreased in September. The decrease of 0.02 points brings the index to 0.81 points. A negative production trend in recent weeks and further increases of sales prices balance each other out.
The FISI – European Foundry Industry Sentiment Indicator – is the earliest available composite indicator providing information on the European foundry industry performance. It is published by CAEF the European Foundry Association every month and is based on survey responses of the European foundry industry. The CAEF members are asked to give their assessment of the current business situation in the foundry sector and their expectations for the next six months.
The BCI – Business Climate Indicator – is an indicator published by the European Commission. The BCI evaluates development conditions of the manufacturing sector in the euro area every month and uses five balances of opinion from industry survey: production trends, order books, export order books, stocks and production expectations.
Tillman van de Sand
Secretary Commission for Economics & Statistics
phone: +49 211 68 71 — 301