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Euro Watch: Euro Zone Unemployment Rose to Another Record in January

March 2, 2013 by Leave a Comment

That, along with new data showing a decline in inflation in the euro zone, could prompt the European Central Bank to take steps to stimulate the economy when its governing council meets on Thursday, analysts said.

Unemployment in the 17-nation euro zone climbed to 11.9 percent in January from 11.8 percent the previous month, according to Eurostat, the statistical office of the European Union.

For the 27 nations of the European Union, the jobless rate was 10.8 percent, up from 10.7 percent in December. All of the figures were seasonally adjusted.

A separate Eurostat report showed price pressures easing in February. In the euro zone, the annual inflation rate was 1.8 percent, down from 2 percent in January and below the central bank’s 2 percent target.

The jobless data suggests “that wage growth is set to weaken from already low rates” and further depress consumer spending, which has already been hurt by government austerity measures, wrote Jennifer McKeown, an economist at Capital Economics in London, in a research note.

Ms. McKeown said that the low inflation and high joblessness “should leave the E.C.B.’s policy options open,” and that the central bank “might discuss an interest-rate cut or other unconventional policies.”

There was some bright news on Friday. A survey of European purchasing managers by Markit, a data and research firm, showed that German manufacturing output grew for a second consecutive month in February as new business levels improved.

The composite German purchasing managers’ index rose to 50.3 — just above 50, the level that separates growth from contraction — from 49.8 in January. And the Federal Statistical Office in Wiesbaden reported that German retail sales rose 3.1 percent in January from December, when sales fell 2.1 percent.

Another bit of data this week also supports the view that the German economy will recover from a fourth-quarter slump. The European Commission’s economic sentiment indicator for the euro zone rose to 91.1 in February from 89.5 in January, with German confidence leading the gain.

“German industry is clearly rebounding and taking advantage from better external traction,” wrote Gilles Moëc, an economist at Deutsche Bank in London.

Employment is sometimes seen as a lagging indicator of economic growth because companies try to avoid adding to their costs until they are convinced that a rebound is at hand.

But despite the glimmers of hope in German industry, there are few reasons to regard a recovery as imminent. Markit’s overall euro zone purchasing managers’ index was unchanged in February at 47.9, indicating continued contraction.

Olli Rehn, the European commissioner for economic and monetary affairs, forecast on Feb. 22 that the euro zone economy would shrink 0.3 percent this year, about the same as last year. The bloc’s debt problems, and the tax increases and government spending cuts that have been prescribed as the remedy, have sapped spending power, reducing business demand for labor.

In absolute terms, Eurostat estimated that 19 million people in the euro zone and more than 26 million in the European Union were unemployed in January.

Spain’s unemployment rate was 26.2 percent, and Portugal’s was 17.6 percent. Austria had the lowest rate, at 4.9 percent, followed by Germany and Luxembourg, at 5.3 percent each.

Greece’s unemployment rate in November, the latest month for which Eurostat has figures for the country, was 27 percent.

France, which has the second-largest euro zone economy, after Germany’s, had a 10.6 percent jobless rate in January. Britain, which is not a euro member, had a 7.7 percent rate in November.

That compares with unemployment rates of 7.9 percent in the United States in January and 4.2 percent in Japan in December.

This article has been revised to reflect the following correction:

Correction: March 1, 2013

An earlier version of this article carried a headline that misstated the month of the data. The report was for January, not February. An earlier version of the article also misstated the name of a federal agency in Wiesbaden, Germany. It is the Federal Statistical Office, not the Federal Statistics Office.

Article source: http://www.nytimes.com/2013/03/02/business/global/euro-zone-unemployment-rose-to-new-record-in-january-as-inflation-eased.html?partner=rss&emc=rss

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European Economy Grew Slightly in 3rd Quarter

November 15, 2011 by Leave a Comment

Third-quarter real gross domestic product grew 0.2 percent from the previous three months in both the 17 euro-zone nations and in the 27 nations that make up the European Union, Eurostat, the statistics agency, said in Luxembourg. That was the same pace at which G.D.P. had grown in the second quarter. From a year earlier, seasonally adjusted G.D.P. increased by 1.4 percent in both zones.

By way of contrast, the U.S. economy grew by 0.6 percent in the third quarter from the second, while the Japanese economy grew by 1.5 percent.

It was Germany where the momentum was most pronounced, with output lifted by household spending and by businesses investing in machinery and equipment. Real, seasonally adjusted gross domestic product rose 0.5 percent from the second quarter’s 0.3 percent growth, and 2.5 percent from a year earlier, the Federal Statistical Office said in Wiesbaden. The second-quarter figure was revised up from the previously reported 0.1 percent.

In Paris, the French statistics institute, Insee, reported that the French economy grew by 0.4 percent in the third quarter, returning to growth after a 0.1 percent decline in the second quarter, as households spent more and industrial production rose. From a year earlier, the French economy grew 1.6 percent. The second-quarter figure was revised from the previous report, which showed growth as flat.

The preliminary data do not reflect growing evidence of a slowdown that began emerging this autumn.

Confidence is ebbing in Germany, according to a report Tuesday from the Z.E.W. institute. The institute’s economic sentiment indicator declined in November for a ninth straight month, dropping 6.9 points to minus 55.2 points, well below the historical average of 25.0 points and the lowest since the dark days of October 2008.

“World trade is weakening and the public debt problems in the euro zone and in the United States weigh heavily on business activity,” Wolfgang Franz, Z.E.W.’s president, said in a statement. “These risks could even gain more importance and thus could further harm economic growth in Germany.”

Citing painful budget-balancing measures that will weigh on growth, the European Commission last week cut its growth forecast for the 17 euro-zone nations to 1.5 percent this year and to 0.5 percent in 2012.

Olli Rehn, the European commissioner for economic and monetary affairs, said last Thursday that the European Union’s economic recovery “has now come to a standstill, and there is a risk of a new recession.”

Eurostat, the statistical office of the European Union, reported last Wednesday that euro-zone industrial production fell a steep 2.0 percent in September from August. The danger was reflected in a report Tuesday from Statistics Netherland showing that the Dutch economy shrank 0.3 percent in the third quarter from the previous three months — as well as in the sputtering output of the third- and fourth-largest euro-zone economies, Italy and Spain.

Italy’s economy is expected to shrink in the final quarter of 2011, the commission predicted.

Spain, with an unemployment rate of more than 20 percent, is also struggling. On Friday, the INE statistics institute in Madrid said the economy had stalled, growing not at all in the third quarter from the second, and had inched up only 0.8 percent from the third quarter of 2010.

Looking at the limited data available early Tuesday, Jonathan Loynes, an economist in London with Capital Economics, wrote in a research note that it appeared “with export growth generally slowing, it looks like domestic demand in the core economies might have picked up a bit.”

But the data are “all history,” he said. More forward-looking indicators, “suggest that the euro-zone economy is likely to drop back into recession” in the fourth quarter of 2011 “and beyond,” and risks even to gloomy forecasts “are shifting rapidly to the downside.”

Article source: http://www.nytimes.com/2011/11/16/business/global/european-economy-grew-0-2-percent-in-3rd-quarter-helped-by-france-and-germany.html?partner=rss&emc=rss

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Business Briefing | Trading: Inflation Jump in Europe Complicates Life for E.C.B.

October 1, 2011 by Leave a Comment

Consumer prices in the 17-nation euro area rose 3 percent in September from a year earlier, after a 2.5 percent increase in August, the largest increase since October 2008, according to an initial reading by the European Union’s statistical office, Eurostat. Economists polled by Bloomberg and Reuters had expected a reading closer to 2.5 percent.

Eurostat did not provide a breakdown of the data, but the euro’s recent decline against the dollar and other currencies has made imports, many of which, like oil, are priced in dollars, more expensive in the past few months.

Coming on the heels of reports this past week showing declining consumer confidence in Europe and evidence that much of the regional economy is slowing, the data complicate the monetary policy challenge facing the E.C.B., which has a primary responsibility of maintaining price stability.

In Germany, the largest economy in Europe and its engine of growth for several years, the Federal Statistical Office in Wiesbaden said Friday that retail sales declined 2.9 percent from July, in real, seasonally adjusted terms.

Some analysts had expected the E.C.B. to move as soon as Oct. 6 to ease monetary policy. The combination of stagnant growth and rising prices can create a condition known as stagflation, something fragile banks and anxious consumers are eager to avoid.

And while consumer price rises undermine incomes, many economists say that deflation, or a general decline in price levels, is actually more of a threat at present, considering the deleveraging under way among financial institutions and households.

Ben May, an economist at Capital Economics in London, said investors should expect another move by the E.C.B. by the end of 2011, noting that so-called core inflation, which subtracts energy and food prices because of their volatility, appeared to be well below the central bank’s 2 percent target.

“What’s more, any rise is likely to prove temporary, given the recent signs that the recovery is coming to an end,” Mr. May said.

Clemente De Lucia, an economist at BNP Paribas, noted that a methodological change had increased the volatility of consumer price data, meaning that the data should be taken with a grain of salt. In Italy, for example, consumer prices jumped 3.5 percent in September after a 2.3 percent August rise.

He said euro area inflation would probably come in around 2.8 percent this year and fall below 2 percent in 2012.

The U.S. Federal Reserve, the Bank of England, the Swiss National Bank and the Bank of Japan all have set their main overnight target rates at close to zero. The E.C.B.’s main rate is 1.5 percent.

The report weighed on stock markets, with the Euro Stoxx 50 index, a barometer of euro zone blue chip shares, falling 1.5 percent Friday, while the FTSE 100 in London slid 1.3 percent.

Article source: http://www.nytimes.com/2011/10/01/business/global/inflation-jump-in-europe-complicates-life-for-ecb.html?partner=rss&emc=rss

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Debt Crisis Threatens to Taint Broader Economy

August 16, 2011 by Leave a Comment

Most of Europe’s main stock indexes lost ground after the data suggested that the debt and economic problems in countries like Greece and Italy were infecting the rest of the 17-country euro zone. The debt crisis has led a number of governments to sharply cut spending while weathering market turmoil that has damaged business and consumer confidence.

Gross domestic product in the euro zone rose a mere 0.2 percent in the second quarter of 2011 from the first quarter, when growth had advanced by a healthy 0.8 percent, according to Eurostat, the European Union statistics agency. Quarterly economic growth across the 17-nation euro zone was the slowest since mid-2009.

G.D.P. growth in Germany, which has been the tractor hauling the rest of Europe, barely budged, rising only 0.1 percent from the first quarter, when the economy had expanded a robust 1.3 percent, the German Federal Statistical Office said. Quarter-on-quarter growth in the three months through June was well below forecasts of 0.5 percent.

The German figures come after data released on Friday showed that the French economy was at a standstill in the second quarter, leaving Europe’s two largest economies barely growing.

Because government revenue is directly tied to economic growth, the two pillars of the European economy may be less able — and less willing — to prop up the weaker members of the European monetary union. President Nicolas Sarkozy of France and Chancellor Angela Merkel of Germany met on Tuesday in Paris to discuss how to deal with the debt crisis.

“It’s the biggest potential risk,” said Jörg Krämer, chief economist at Commerzbank in Frankfurt. “I don’t worry so much about a moderation of growth two years after a recession. What is different this time is the potential escalation of the sovereign debt crisis.”

Economists said the data could simply reflect a pause after two years of brisk expansion. But the numbers could also signal that the sovereign debt crisis is undercutting growth outside the countries like Spain that are most directly affected.

“The longer the sovereign debt market remains stressed, the greater will be the damage to the wider economy,” Lloyd Barton, an economist who advised the consulting firm Ernst Young, said in a note Tuesday.

If there was any silver lining in the report, it was the hope that slower growth would lead to less inflation, giving the European Central Bank more leeway to keep interest rates low and intervene in bond markets. Since last week, the bank has been buying Italian and Spanish debt on the open market to hold down yields so that the two countries do not face ruinous borrowing costs.

“Today’s G.D.P. release points to slightly lower second-quarter growth than the E.C.B. was expecting and lends support to the dovish voices on the E.C.B. governing council,” Jens Sondergaard, an analyst at Nomura, said in a note. He was referring to members of the council who are less concerned about inflation than hard-line “hawks.”

What impetus remains in the European economy came from countries like Austria and Finland. Even Italy, with growth of 0.3 percent compared with the first quarter, outperformed Germany in the second quarter. A whiff of hope came from Portugal, one of the countries at the heart of the debt crisis, as the economy stopped shrinking for the first time since October 2010.

European stocks initially fell sharply on Tuesday, but recovered late in the day. The benchmark indexes in Germany and France all closed down less than 1 percent.

The euro fell to $1.4404, from $1.4444.

The German economic rebound since the recession of 2009, driven by exports of cars, machinery and other goods to China and other emerging markets, has helped counterbalance weak economies in southern Europe. But if Germany slows for an extended period, the challenges posed by the European sovereign debt crisis will become that much more daunting.

Despite signs that austerity programs were hurting growth, debt-ridden governments probably have little choice but to continue to cut spending to persuade their creditors that they can meet their debt obligations. Equally important, the European Central Bank has made it clear that it would support Italy and Spain by buying their bonds only if they continued to cut reduce their deficits.

The slowdown in Germany was caused by lower household consumption and construction investment, the German statistics office said. In addition, imports rose faster than exports and led to a buildup of inventories.

Mr. Krämer of Commerzbank said that a warm spring meant that construction projects in Germany had begun earlier than usual, subtracting some activity from the second quarter.

Germany had been enjoying a period of unusually high growth, during which the number of people employed rose 1.4 percent, to 41 million people from a year earlier, the German statistics office said Tuesday. Even with the slowdown in the second quarter, the economy still grew 2.7 percent from a year earlier.

The Federal Statistical Office revised its figures for previous quarters, which meant that, contrary to earlier data, German output remained below its peak in late 2008, just before the severe global recession struck.

The slowdown was foreshadowed by earnings from companies like Siemens and Deutsche Bank that fell short of analysts’ expectations, reinforcing the feeling that the pace of German economic growth was flattening. Surveys of business sentiment have also pointed to slower growth, though they are not yet signaling a recession.

Greece is already in recession, while growth in Spain slowed to 0.2 percent from 0.3 percent in the previous quarter.

Trade data from Eurostat contributed to the gloomy picture. Seasonally adjusted figures showed that both exports and imports in the euro area slowed in June, while the trade deficit widened to 1.6 billion euros ($2.3 billion), from 800 million euros in May.

Article source: http://feeds.nytimes.com/click.phdo?i=cb53a362973fb26bc5c807d03ce1acad

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