More difficulty ahead for food sector as European recession eases

By Caroline Scott-Thomas

- Last updated on GMT

Related tags Food industry Euro European union

More difficulty ahead for food sector as European recession eases
France and Germany have emerged from recession but the global nature of the food industry may mean it takes longer to recover than other sectors, according to a senior economist at Wageningen University.

The European Union’s statistics office revealed the surprise figures on Thursday, showing that both France and Germany’s economies grew by 0.3 per cent in the second quarter of 2009. The euro area economy contracted by only 0.1 per cent overall, compared to 2.5 per cent in the first quarter, prompting some economists to predict that the recession may be coming to an end.

But senior economist at Wageningen University’s Agricultural Economics Research Institute (LEI) in the Netherlands Krijn Poppe warned against premature optimism.

He told ““I hope that these new figures are really a turning point…But there will still be a big increase in unemployment and I am not optimistic for the food industry.”

He said that although “the food industry is less affected than other sectors”,​ this is not likely to mean that recovery will come faster or more easily to the sector.

“I think the opposite is true,”​ he said. “If the downturn is not as big, it means that the recovery is probably slower.”

In particular, Poppe said that part of the reason for the encouraging European figures is that the automotive industry has begun to show signs of recovery. Car sales are up – but this has been stimulated by government intervention, which the food industry has not experienced.

Global influences

“The other issue is that for a number of products it is very much a global industry,”​ he said. “…It’s positive that France and Germany are improving and that the Asian economy seems to be improving too.”

But although France and Germany have seen some recovery, many other European countries’ economies are still shrinking, including the UK’s, which shrank 0.8 per cent in the quarter, and the Netherlands’, which saw the biggest contraction in the euro area, at 0.9 per cent.

Poppe said: “Especially Germany is very important for the Netherlands but it will certainly not offset the problems that the food industry has in its own market, or that the UK has in the sterling market.”

He concluded that despite yesterday’s figures providing some reason for cheer, it is more likely that the European food industry will see recovery “some time in 2010.”

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