I went looking for some numbers on European economic performance. Per the “talking heads” on financial news shows, things are a bit slow, but not all that bad, and getting better and it’s all going to be rosy Real Soon Now… but I suspected that the Network News was “in the bag” for liberal causes and then CNBC / CNBC World tend to be too (though their basic financial facts tend to be accurate). Fox is always ranting about things, so hard to figure what is news and what is rant some times. Fox Business did some Tsk Tsking, but not a lot of numbers. Mostly, I think, since they presume Americans are mostly just interested in America… and that may be right… But doesn’t help me. They go to ‘infomercials’ during European market opening hours prep, then do “Imus in the morning” shock jock happy talk. Very much non-useful for money issues or European economic perspective…
So I figured I was “on my own” to dig up just what the present status really is.
I found an article that more or less explained the Italian election. 25% ‘undecided and unhappy’ going into the vote. Polling forbidden in the last week, so lots up in the air. The “austerity” candidate in last place and the ‘crazy uncle’ protest candidate scoring high. The “old guard” and “bunga bunga” party and connections candidate(s) being so “how can I miss you if you won’t go away?”. And the economy being dismal and getting worse.
This was in the context of European new car sales being well down.
So with “Let’s just leave the EU” leading by about 3:1 in the UK and with Italy having a similar rising tide, durable goods sales down, and folks peeved; I wondered “Can I get some numbers to tell me if folks are likely to feel better soon?” Which lead to the following pages / sites and their dismal numbers.
Economics is called “The Dismal Science”. (Largely due to Malthus being one of the very first economists). Turns out one party has registered “The Dismal Scientist” ;-) They also bagged the site name “economy.com”. Moody’s Analytics. Gotta like that style.
Gives their present outlook on Spain. It looks like one of those links that is likely to change over time as new updates arrive, so not sure it will show the same thing in a few weeks as it shows now. So I’ll quote or paraphrase the big lumps. They have some really nice graphs that I’m not going to reproduce here, so please hit the link to see them.
First off, Spain is in a deepening recession.
The Spanish economy contracted by 0.3% in the third quarter of 2012 from the previous stanza when it retreated by 0.4%. Private consumption contracted by 0.5%, while investment plunged by 1.4%. The Spanish economy will face a tough time ahead, and we expect GDP to shrink through 2012 and 2013. This will make it hard for the government to achieve its already-revised fiscal deficit targets, and we cannot rule out the authorities in Madrid turning to the EU for help in dealing with high government borrowing costs, after they have already asked for a banking sector bailout.
That’s a bit misleading as ‘contracting by 0.3%’ in the quarter is the delta from an already shrunken status. That’s a 1.2% per year rate of shrinkage on top of shrunken. The graph shows them declining steadily from year ago values, that were themselves none too swift. So the government not going to make it on deficits, more EU bailout to be needed, shrinking economy, Same Old Same Old.
The unemployment graph continues rising from “lower left to upper right” and is at 26% now. Lord knows what it is for selected groups like young folks or less well off / well educated. And no end in sight to the increases.
Spain’s unemployment rate jumped to a record high of 26% in the fourth quarter of 2012 from 25% in the three months to September. The jobless rate had been climbing since the second quarter of 2007, when it stood at 8%. With the economy in a double-dip recession, unemployment will continue to climb in the coming quarters. Rising joblessness will make it harder for the government to achieve its fiscal deficit targets.
Harder? How about impossible?
Industrial output dropping too.
Spanish industrial production deteriorated further in December. Industrial output fell 6.9% in year-ago terms, adjusted for working days, following a 7% decline in November. Industry will be under pressure into 2013, [...]
Those numbers are frightening, and I don’t scare easy. We’re talking “Spiral decent into hell” behaviour here. Dropping production (and taxes) leading to lower employment (and taxes) leading to lower buying (and taxes) leading to lower demand and production leading to… while the government gets ever lower tax take at each turn of the cycle so higher deficits and borrowing and taxes… Looks terminal based on the numbers.
The “sidebar” table says bank lending is down over 10% and retail sales are down over 10%. House prices down 9.8% so a little less dismal ;-)
What about Greece?
Unemployment at 25% and rising steadily. Real GDP dropping 6% year over year (and last year was not good…) 12 Month moving ‘sum’ of trade, down about 10%. Some good news. Inflation dropping from 10% toward 2%; but that rate of decline needs to slow down or we are talking hitting the deflationary implosion of asset values. The industrial production graph looks like a nice rising from lower left to upper right… until you realize it starts at -12% and rises to zero. So down a lot and just laying there quivering now. Retail sales off 15%.
All in all, another moribund and getting worse situation.
Italy is “less bad”
Unemployment dropping from 10.9 to 9.8 %. Real GDP that had been down about 0.7% for three quarters in a row, only down 0.2% this quarter (compared to last year that was down 0.1% from prior…) Industrial production down 7% from year ago, but up 0.4% month over month; and with a positive balance of trade. They imply it might not last, though, as the currency relative value that made it happen has now reversed.
Italy’s foreign trade balance improved in December thanks to a jump in exports to countries outside the euro zone and weakening imports. Italy reported a not seasonally adjusted surplus of €2.2 billion in December, following a €1.4 billion deficit in the same month last year. The 18% depreciation in the value of the euro from May 2011 to July 2012 supported goods exports and helped rebalance the Italian economy. The euro’s recent gains, however, pose a risk for the Italian economy in coming months.
Germany was doing “OK” but the surprise for me was France.
I had not expected such a rapid response to the stupid tax policies and the shift to a socialist leaning leadership.
France’s economy contracted 0.3% q/q in the three months to December, following a revised 0.1% expansion in the previous quarter. The main drivers were weaker fixed investment and exports.
From weak growth to contraction in one quick step. Unemployment 10.3% and rising nicely. Industrial production back to falling, if slowly for now.
Industrial production in France fell 0.1% m/m in December, seasonally adjusted, following a 0.5% increase in the previous month. The main driver was weaker energy production. Moody’s Analytics and the Bloomberg market consensus had forecast declines of 0.5% and 0.3%, respectively. Demand for local products will remain under pressure from the strong euro and weak economic activity, tight credit, and rising unemployment in France and its key euro zone trading partners.
Then topped off with a ‘greater than 5 Billion Euro trade deficit’.
What does it all mean?
To me it looks like “more of the same and getting worse” for the places outside Germany. Unless the rest of the Euro Zone is doing really well, like Germany, this is going to get ugly. I just don’t see who or what will pull France, Italy, Spain and Greece out of their decent. Their governments are not helping, and Italy is likely to vote to make things worse (as they don’t like the “Austerity” guy they have now). I see little to help Spain and Greece suddenly reverse (and shoving more money at less productivity doesn’t fix it, even German money). France is already going into hock to buy stuff from outside; and is learning that higher tax rates lead to lower tax take. Again.
So looks to me like a pretty dismal prospect. Especially with the Euro relatively strengthening and the Yen in freefall. Why by a Phillips TV if a Panasonic is cheaper? Why buy an Italian motorcycle if Honda is dropping? Why take a vacation in expensive Euro land when Yen buy plenty of hotel? (And why buy German polymer if Japanese polymer is just as good and lower priced…)
So the Euro Zone may want to avoid a “competitive devaluation”, but I don’t see how they can hold out. Italy is already talking exit and Greece may not have any choice if things keep doing what they are doing.
That also means Europe is going to be an ever less vigorous customer for China. So China will have less money to invest. With the USA buying everything on credit, the net real wealth is just not showing up. At some point China will not be able to buy more Africa and Australia and Canada while still having money to fund internal growth AND loan it to the USA at $Trillion a year.
The rest of the global economy is tinker toy sized compared to the EU, USA, Japan, and China. And much of THAT is dependent / derivative. (Australian and Canadian mineral and energy sales to China, for example. Or Latin sales of minerals and oil to the USA.)
So I’m just having a little bit of trouble seeing where anyone is being frugal, living inside their means, has excess money to invest, and has customers paying in something other than evaporating promises. EU is on life support (other than Germany). USA is in debtors prison and maxing out the credit card pronto. Japan is moribund and doing a massive pay cut via devaluation. China depends on all of them to buy stuff and transfer wealth, but there is ever less wealth to transfer and ever more printed paper.
Is it just me? Does anyone else see some hope in all this?
All I’m seeing is a whole lot of “print and pray” and not a whole lot of “wealth creation” and real growth. More folks “going Galt” as the government burden gets too high and fewer carrying the load. Is anyone other than Germany in a condition to carry the EU? Will Germany keep on doing it? Can China keep on buying German cars to support Germany when it involves using either Euro from European sales that are dropping or $US that nobody will want as it shrinks? Can there be a China / Germany productivity axis that lets the rest of the world have a free ride on their loans? I don’t see that as “sustainable”…
So I’m going to be watching that Italian election closely. (Next Sunday?) And I’ll likely check those Dismal Scientist (r) links each month for a while to see if the downtrend continues, or slows / reverses. Toss in a USA “cluster congress” on the “sequester” and a Dimocrat “politics first, nation be damned” scorched economy policy; well, I’m feeling a bit dismal about all this stuff too. Prices of everything are rising in the USA, so not a lot of added money in the pockets of consumers here to make the whole thing work either. I don’t see a consumer lead recovery anchored in the USA spreading over the globe. But will be watching the Sequester Snarkfest unfold and “the lose/lose choice” of continued massive debt explosion vs sudden government expenditures hitting the wall.
There’s got to be something positive out there. But I’m sure not seeing it. Maybe it’s in Latin America… but with Bolivia doing ongoing Nationalizing, Ecuador reelecting their Socialist President, Argentina going for more riots, and Brazil doing the Socialism Stagnation dance, that means only a few small ones left to be doing well.
Oh Well. Maybe next month things will be better… “This time for sure!” Or maybe we can round up some more Central Banks to print more paper to hire more folks to work for the government…