European confidence in the economic outlook improved to the highest in more than two years in August after surging exports helped the economy expand at the fastest pace in four years in the second quarter.
An index of executive and consumer sentiment in the 16 Euro nations rose to 101.8 from a revised 101.1 in July, the European Commission in Brussels said in an e-mailed statement today. That’s the highest since March, 2008 and exceeded economists’ forecast for an increase to 101.6, based on the median of 28 estimates in a Bloomberg News survey.
European confidence may falter as the global recovery shows signs of weakening and governments step up spending cuts to trim budget deficits. The U.S. economy expanded less than initially anticipated in the second quarter and growth in Europe’s services and manufacturing industries slowed this month.
The Euro remained lower against the dollar after the report, and was down 0.3 percent to $1.2719 as of 10:05 a.m. in London. Bonds stayed higher, with the yield on the 10-year German bund down 4 basis points to 2.16%.
Cooling Economy
A gauge of confidence among consumers rose to minus 11 in August from minus 14 the previous month, today’s report showed. Manufacturing sentiment held at minus 4 and construction confidence remained at minus 29. Confidence within the service industries rose to 7 from 6.
The index is based on a survey of 130,000 executives and 40,000 consumers conducted in the first two weeks of the month.
European manufacturers have relied on faster-growing emerging economies to fuel earnings as households held back spending. German exports surged 8.2% in the second quarter, helping to power record economic growth. Bayerische Motoren Werke AG, the world’s largest maker of luxury cars based in Munich, said on Aug. 9 that sales rose 9.1% in July, spurred by demand from China.
Companies may find it hard to maintain revenue growth as the global economy cools. U.S. economic expansion slowed to 1.6% in the second quarter, lower than a 2.4% estimate issued last month. In the U.K., a gross-domestic-product report on Aug. 27 showed slower services growth than previously estimated and a drop in fixed investment.
Policy Response
The strong and stable growth will require appropriate and effective response from economic policy makers across a wide spectrum as well as private sector leaders.
European Central Bank officials will hold their next policy meeting on Sept. 2. The Financial Times reported today that the ECB is likely to extend emergency aid for the region’s banking industry into next year.
European governments from Italy to Spain have been forced to step up spending cuts to push down budget deficits and help restore investor confidence. The second half of 2010will probably be much less buoyant than the three months through June, when the Euro-area economy expanded 1%, the fastest in four years. Global economic conditions are beginning to cool down a little. The Euro-area generally is struggling.
Protracted Recovery
The commission’s gauge measuring manufacturers’ confidence in their export orders rose to minus 18 in August from minus 21 in July, today’s report showed. An index of overall order books rose to minus 19 from minus 21 and a gauge of employment expectations held at minus 6. Confidence in production expectations declined. Among services executives, a gauge of demand expectations for the next three months rose to 8, the highest in three months.
There will be a long, slow protracted recovery in Europe. Europe or the U.S. are not showing significant growth for the next five years at least.
Recession Risk
In London that risks of the euro-region economy slipping into another recession are increasing. If marked slowdown in key export markets achieved, the European economy is extremely exposed to that. It was clear that the growth momentum would moderate both in emerging markets and the U.S.
Source: www.bloomberg.com
Thank you,
Minita Aiya
Client Service Associate
DENIP Consultants Pvt. Ltd.
No comments:
Post a Comment