Eurozone Industry Faces K-shaped Divergence: High Tech Stands Out Amid Structural Decline in Traditional Manufacturing

⑴ Analysts at Capital Economics noted that although the eurozone industry has shown some resilience after the outbreak of the Iran conflict, the sector's long-standing structural imbalance issues remain unresolved. ⑵ Industrial activity in the eurozone had already entered a recessionary phase before the pandemic, with performance gaps among various industries continuing to widen, presenting a typical K-shaped divergence. ⑶ Output in high-tech and defense-related sectors has continued to grow, while most traditional manufacturing sectors remain in a structural decline due to high energy costs and intense international market competition. ⑷ Analysts believe that persistently high energy input continues to erode the competitiveness of traditional industry, and changes in the global trade landscape have not brought significant positive spillover effects to eurozone industry. ⑸ Regarding the EU's recently possible trade policy adjustments, the institution is skeptical and believes that such measures will be difficult to fundamentally reverse the sector's structural downturn. ⑹ The key to the future recovery of eurozone industry lies in the sustainable decline of energy costs and the recovery of emerging market demand. Without external catalysts, the K-shaped divergence may further deepen.