Posts Tagged ‘Eurostat’

Eurodammerung?

Wednesday, May 23rd, 2012

Despite Germany’s strong manufacturing output in March, it was not enough to compensate for a slump across the rest of the Eurozone with declining production, a signal that an expected recession may not be as mild as policymakers hope.  Industrial production in the 17 Eurozone countries declined 0.3 percent in March when compared with February, according to the European Union’s (EU) statistics office Eurostat.  Economists had expected a 0.4 percent increase.

The figures stood in stark contrast with German data showing output in the Eurozone’s largest economy rose 1.3 percent in March, according to Eurostat, 2.8 percent when energy and construction are taken into account.  “With the debt crisis, rising unemployment and inflation, household demand is weak and globally economic conditions are sluggish, so that is making people very reluctant to spend and invest,” said Joost Beaumont, a senior economist at ABN Amro.

According to Eurostat, output declined 1.8 percent in Spain; in France — the Eurozone’s second largest economy after Germany — output fell 0.9 percent in March.  Many economists expect Eurostat to announce that the Eurozone went into its second recession in just three years at the end of March, with households suffering the effects of austerity programs designed to slash debt and deficits.

“Industrial production is a timely reminder that first-quarter GDP will likely show a contraction,” said Martin van Vliet, an economist at ING.  “With the fiscal squeeze unlikely to ease soon and the debt crisis flaring up again, any upturn in industrial activity later this year will likely be modest.”  European officials believe that the slump will be mild, with recovery in the 2nd half of this year.  The strong economic data seen in January has unexpectedly faded point to a deeper downturn, with the drag coming from a debt-laden south, particularly Greece, Spain and Italy.

Economists polled by Reuters estimated the Eurozone economy contracted 0.2 percent in the 1st quarter, after shrinking 0.3 percent in the 4th quarter of 2011.  “We suspect that a further slowdown in the service sector meant that the wider economy contracted by around 0.2 percent last quarter,” said Ben May, an economist at Capital Economics.  “What’s more, April’s disappointing survey data for both the industrial and service sectors suggest that the recession may continue beyond the first quarter.”

“It is evident that Eurozone manufacturers are currently finding life very difficult amid challenging conditions,” said Howard Archer at IHS Global Insight. “Domestic demand is being handicapped by tighter fiscal policy in many Eurozone countries, still squeezed consumer purchasing power, and rising unemployment.”  Eurozone governments have introduced broad austerity measures in order to cut debt, and these have undermined economic growth.

European watchers also expect to see Greece exit the Eurozone.  Writing for Forbes, Tim Worstall says that “As Paul Krugman points out, the odds on Greece leaving the Eurozone are shortening by the day.  In and of itself this shouldn’t be all that much of a problem for anyone. Greece is only two percent of Eurozone GDP and it will be a blessed relief for the Greeks themselves.  However, the thing about the unraveling of such political plans as the Euro is that once they do start to unravel they tend not to stop.”

The European Commission hopes Greece will remain part of the Eurozone but Athens must respect its obligations, the European Unions executive Commission said.  “We don’t want Greece to leave the Euro, quite the contrary – we are doing our utmost to support Greece,” European Commission spokeswoman Pia Ahrenkilde Hansen said.  Greece is likely to face new elections next month after three failed attempts to form a government that would support the terms of an EU/IMF bailout.  Opinion polls show most Greeks want to stay in the Eurozone, but oppose the harsh austerity imposed by the emergency lending program.  “We wish Greece will remain in the euro and we hope Greece will remain in the euro … but it must respect its commitments,” according to Ahrenkilde.  “The Commission position remains completely unchanged: we want Greece to be able to stay in the Euro.  This is the best thing for Greece, for the Greek people and for Europe as a whole,” she said.

European Central Bank (ECB) policymakers Luc Coene and Patrick Honohan voiced the possibility that Greece might leave the currency bloc and reached the conclusion that it will not be fatal for the Eurozone.  According to Luxembourg’s Finance Minister Luc Frieden “If Greece needs help from outside, the conditions have to be met.  All political parties in Greece know that.”  There are powerful incentives for keeping Greece stable, one of which is that the ECB and Eurozone governments are major holders of Greek government debt.  A hard default could mean heavy losses for them; if the ECB needed recapitalizing as a result, that debt would fall on its members’ governments, with Germany first in line.  “If Greece moves towards exiting the Euro…the EU would then need to enlarge its bailout funds and prepare other emergency measures,” said Charles Grant, director of the Centre for European Reform think-tank.

Meanwhile, Britain’s Deputy Prime Minister Nick Clegg warned euro skeptics to avoid gloating over the state of the Eurozone as Greece tries to assemble a workable government.  According to Clegg, “We as a country depend massively on the prosperity of the Eurozone for our own prosperity, which is why I can never understand people who engage in schadenfreude – handwringing satisfaction that things are going wrong in the euro.  We have an overwhelming interest – whatever your views are on Brussels and the EU – in seeing a healthy Eurozone.  That’s why I very much hope, buffeted by these latest scares and crises in Greece and elsewhere, that the Eurozone moves as fast as possible to a sustainable solution because if the Eurozone is not growing and the Eurozone is not prosperous it will be much more difficult for the United Kingdom economy to gather momentum.”

Rising Unemployment Could Push Eurozone Into a Double-Dip Recession

Wednesday, April 18th, 2012

Europe’s unemployment has soared to 10.8 percent, the highest rate in more than 14 years as companies from Spain to Italy eliminated jobs to weather the region’s crisis, according to the European Union’s (EU) statistics office.  That’s the highest since June 1997, before the Euro was introduced.  European companies are cutting costs and eliminating jobs after draconian austerity measures slashed consumer demand and pushed economies from Greece to Ireland into recession.

According to Eurostat, the number of unemployed totaled 17.1 million, nearly 1.5 million higher than in 2011.  The figures stand in marked contrast to the United States, which has seen solid increases in employment over the past few months.  “It looks odds-on that Eurozone GDP contracted again in the first quarter of 2012….thereby moving into recession,” said Howard Archer, chief European economist at IHS Global Insight.  “And the prospects for the second quarter of 2012 currently hardly look rosy.”

The North-South divide is evident, with the nations reporting the lowest unemployment rates being Austria with 4.2 percent; the Netherlands at 4.9 percent; Luxembourg at 5.2 percent; and Germany at 5.7 percent.  Unemployment is highest among young people, with 20 percent of those under 25 looking for work in the Eurozone, primarily in the southern nations.  The European Commission, the EU’s executive arm, defended the debt-fighting strategy, insisting that reforms undertaken by governments are crucial and will ultimately bear fruit.  “We must combat the crisis in all its fronts,” Amadeu Altafaj, the commission’s economic affairs spokesman, said, stressing that growth policies are part of the strategy.

According to Markit, a financing information company, Germany and France, the Eurozone’s two powerhouse economies, saw manufacturing activity levels deteriorate.  France fared the worst with activity at a 33-month low of 46.7 on a scale where anything below 50 indicates a contracting economy.  Only Austria and Ireland saw their output increase.

Spain, whose government recently announced new austerity measures, had the Eurozone’s highest unemployment rate at 23.6 percent; youth unemployment — those under 25 years of age — was 50.5 percent.  Greece, Portugal and Ireland — the three countries that have received bailouts — had unemployment rates of 21 percent, 15 percent and 14.7 percent respectively.

With unemployment rising at a time of austerity, consumers have stopped spending and that holds back the Eurozone economy despite signs of life elsewhere.  “Soaring unemployment is clearly adding to the pressure on household incomes from aggressive fiscal tightening in the region’s periphery,” said Jennifer McKeown, senior European economist at Capital Economics.  She fears that the situation will worsen and that even in Germany, where unemployment held steady at 5.7 percent, “survey measures of hiring point to a downturn to come.”

The numbers are likely to worsen even more. “We expect it to go higher, to reach 11 percent by the end of the year,” said Raphael Brun-Aguerre, an economist at JP Morgan in London.  “You have public sector job cuts, income going down, weak consumption.  The economic growth outlook is negative and is going to worsen unemployment.”

Writing for the Value Walk website, Matt Rego says that “By the looks of it, Europe could be heading for a recession very soon.  If the GDP contracts this 1st quarter of 2012, they will most likely be in a double dip.  Those are some pretty scary numbers and forecasts because they would send economic aftershocks around the world.  If Europe goes into a double dip and U.S. corporate margins do peak, we could be looking at trouble.  If you are a ‘super bull’ right now, I would reconsider because we are walking the line for both factors coming true and there really is nothing we can do, the damage is done.  Could we have seen all of the year’s gains in the beginning of this year?  Probably not but this European recession scare would certainly trigger a correction in the U.S. markets.  Bottom line, get some protection for your portfolio.  Buy stocks that aren’t influenced by economic times and buy protection for stocks that would react harshly to a double dip.”

A Tale of Two Countries: Germany and Spain

Monday, January 23rd, 2012

Germany’s unemployment declined more than predicted in December as car and machinery exports boomed and one of the mildest winters on record helped construction jobs. The number of jobless people declined a seasonally adjusted 22,000 to 2.89 million, according to the Nuremberg-based Federal Labor Agency.  Economists had forecast a decline of 10,000.  The adjusted jobless rate fell to just 6.8 percent.  German firms are working virtually nonstop to fulfill orders for exports and investment goods.  As a result, the nation has defied a debt crisis that the European Commission fears will unleash a recession throughout the Eurozone.  The Munich-based IFO Institute’s measure of business confidence also rose unexpectedly in December.  Polls show that the majority of Germans see their jobs as secure even as Europe’s biggest economy slows.  Forward-looking indicators including IFO’s underscore that the German jobs motor is fundamentally intact, said Johannes Mayr, a senior economist at Bayerische Landesbank in Munich.

Except for an unexpected 6,000 increase in October, German unemployment has declined in every month since June 2009. The average jobless total in unadjusted terms for 2011 was well below the three million mark, Labor Agency head Frank-Juergen Weise said.  “German unemployment mastered the dual impact of the debt crisis and weakening economic growth in 2011 but these risks remain, accompanying us as we enter the new year, Weise said.

Both the jobless total and the jobless rate were at their lowest level since unification in 1991, noted German Economy Minister Philipp Roesler. “2011 can be described as the most successful since German unification for working people,” Roesler said.  “Demand for labor remains very high, despite the current economic risks.  Overall, the upturn in employment should continue, albeit at a slower rate.  The labor market remains one of the main pillars of our economy,” the minister said.

The national statistics office Destatis reported that the number of employed people in Germany hit a new record of 41.04 million in 2011, with more than 500,000 jobs created.  It was the first time the number of people working in Germany has risen above 41 million, Destatis said.  The nation’s population is approximately 82 million.

“Overall, labor market conditions will remain markedly healthier in Germany than in most other countries in Europe in the months ahead,” said IHS Global Insight’s Timo Klein. At present, Germany is confronting a shortage of skilled labor.  Leading economists anticipate that Germany’s economic growth will slow in 2012, in line with other major Eurozone economies, which may put a squeeze on wages and jobs.  But, unemployment at a record low for the last 20 years, is a position that most countries envy and a sign of the way Germany has rebuilt itself since the Wall was torn down.

“Germany’s manufacturing and export-driven economy finished the year strongly — piling on another 22,000 jobs in December,” said Anthony Cheung of market analysts RANsquawk.  “Behind the strong performance lie some adept moves by Germany’s exporters.  As their Eurozone markets weakened, they have been very good at moving their focus elsewhere.  German carmakers have more than compensated by dramatically growing sales to developing markets.”

This is one reason why companies are not shedding significant staff, even if the economy hits a downturn, said Berenberg Bank’s Holger Schmieding.

Germany’s labor market strength means that domestic demand will “remain a pillar of support” to the eurozone “under very challenging circumstances otherwise,” Schmieding said.  The Eurozone badly needs this help.  For example, Spain again published dire labor market data with the jobless rate rising by nearly 2,000 in December when compared with November.  Eurostat’s most recent data showed October unemployment in Spain at 22.8 percent, by far the Eurozone’s highest.

Spain represents an entirely different scenario.  During 2011, unemployment in Spain soared 7.9 percent, totaling an astonishing 322,286 individuals.  Nearly one-third of all the Eurozone’s unemployed are Spanish; approximately 50 percent of young Spaniards are out of work.  The tough austerity measures outlined by the new prime minister, Mariano Rajoy, are likely to push Spain’s jobless rate even higher.  These include €8.9 billion in spending cuts and tax increases to cut Spain’s borrowing which should total €16.5 billion in 2012.  Spain closed out 2011 with a deficit of 8 percent of its GDP, significantly higher than the six percent reported at the end of 2010.  “This is the beginning of the beginning,” said Deputy Prime Minister Saenz de Santamaria, noting that Spain is facing “an extraordinary, unexpected situation, which will force us to take extraordinary and unexpected measures.”  She stressed that the wealthiest will be increasingly taxed for at least two years, resulting in expected budgetary gains of €6 billion.

These numbers represent a new 15-year high in Spain’s unemployment rate “The figures for the number of registered unemployed for the month of December confirm the deterioration of the economic situation during the second half of the year,” according to Spain’s labor ministry.  Once the Eurozone’s job creation engine, Spain has struggled to find jobs for the millions thrown out of work since the 2008 property bubble collapse.

The bad news fueled fears that Spain, the Eurozone’s fourth-largest economy, was slipping back into recession after the economy posted zero growth in the 3rd quarter of 2011.  Prime Minister Rajoy’s new government has promised to fight unemployment and fix the country’s finances as its top priorities.  Rajoy plans to present a major labor market reform which will alter hiring laws and Spain’s collective bargaining system to encourage companies to hire workers.

Spain’s secretary of state for employment, Engracia Hidalgo, said the successive labor reforms carried out by the previous government “never made the labor market more dynamic and flexible.”  Spain  lets the jobless receive unemployment benefits for a maximum of two years.  Prime Minister Rajoy’s government extended a monthly payment of 400 euros ($520) for people whose benefits have run out.  Otherwise, the payments would have expired in February.