Bad news out of the EuroZone this week as more of the top economies across the pond slipped into a recession, including the European Union’s 2nd-largest market for medical devices.
Eurostat, the statistical office of the European Union, said yesterday that the gross domestic product of the 17-nation alliance contracted 0.2% during the first 3 months of 2013 compared to the previous quarter and 1% compared to the same period last year.
France, 1 of the largest economies in the EU and the 2nd-largest medical device market there, slipped into a recession for the 1st time since 1999. The GDP of France contracted 0.2% compared to the previous quarter and 0.4% from the same period last year and has now contracted 2 quarters in a row, the traditional benchmark for a diagnosis of recession.
Making up an estimated 16% of the total EU medical market, France is clearly an important beachhead for the industry. In 2009, the French medical device market was valued at $9.1 billion, according to the Emergo Group.
The news wasn’t much better in Germany, the EU’s top economy, which barely moved during the first 3 months, ticking up just 0.1% compared to the previous quarter and down 0.3% compared to the previous year. Economists had predicted the German economy would grow by 0.3%, according to Bloomberg.
Germany makes up 31% of the EU medical device market and has been the lone bright spot there for the past 2 years. While the German economy eked out growth in the quarter, economists said that was driven "almost exclusively" by increased household spending.
The bad news continued in Spain, which contracted by 0.5% for the quarter and 5.3% compared to last year. Italy contracted 0.2% for the quarter and 2.3% compared to last year.
The lone bright spot may now be the United Kingdom, which reported 0.3% sequential growth, avoiding the recession label after a 0.3% Q4 dip. The U.K.’s GDP grew 0.6% compared to last year.
The weakened European market continues to be a drag on the medical device industry. Several firms have already re-calibrated sales and earnings guidance for 2013 to compensate for conditions across the pond.
Last week, Dentsply International (NSDQ:XRAY) boosted profits 35% during the 1st quarter but lowered its 2013 guidance to account for worsening market conditions in the European Union. Industry giant Boston Scientific (NYSE:BSX) also cited weakness in Europe as a primary reason for lowering its 2013 forecast of sales to be between $6.95 billion and $7.15 billion, down from $7.05 billion to $7.35 billion.
There may be some positive news coming later this week as Japan, a critical market for the device industry, is today expected to report positive GDP growth of 2.8% for the 1st quarter.