Germany propped up the euro zone as Italy and the Netherlands slid into the clutches of recession in the first quarter of 2005, but Germany’s surge in growth was not enough to dispel fears of European slowdown.
European statistics agency Eurostat announced an 0.5 percent rise in output for the euro zone as a whole in the period after a meagre 0.2 percent in the last three months of 2004 and the European Commission cut its second quarter growth forecast.
“Eurozone recovery is still pretty much stuck in the mud,” David Brown, economist at Bear Stearns brokers in London, said.
A 1.0 percent export-driven rise in Germany, which accounts for a third of output in the 12-nation euro zone, offset contractions of 0.5 percent in Italian gross domestic product in the first quarter and of 0.1 percent in the Netherlands.
Despite the arrival of some good news, finally, from Germany, there are no parades scheduled just yet:
There are fears things may have got worse since end-March, and some vital data on the first quarter was even missing on Thursday because France and Spain opted not to issue similar estimates due to planned changes in GDP calculation methods.
Germany’s news was a positive surprise from an economy that has been performing below par for a decade but the real problem, the fact that consumer spending fails to match whatever thrustthe economy gets from exporting, lingered on...
“This is light at the end of the tunnel but not an all-clear for economic growth,” said German central bank chief Axel Weber, who on Wednesday predicted that “during the rest of the year we should see a weakening of growth dynamics”.
The European Commission trimmed its forecast for quarterly euro zone growth to a range of 0.2-0.6 percent for the second quarter from an earlier forecast of 0.3-0.7 percent from April 14. It forecast third quarter GDP growth of 0.2-0.6 percent...
The Commission cut its forecast for euro zone growth this year to 1.6 percent from 2 percent in April, after 2 percent growth in 2004.
And boy, oh boy, are we in a foul mood:
“When I meet my European colleagues there is a bigger pessimism today than there was half a year ago,” Swedish Finance Minister Per Nuder said on Wednesday.
Surveys of business and consumer confidence have pointed to deteriorating morale since the end of the first quarter, while April surveys of corporate purchasing managers suggested slower activity in the service and manufacturing sectors globally, with manufacturers in places like Italy close to recession.
And misery does love company:
Fuelling the idea that things may be unravelling a bit, the Organisation for Economic Cooperation and Development said on Wednesday its monthly indicator of economic prospects fell in March in all of the G7 industrialised powers -- the United States, France, Germany, Italy, Britain, Canada and Japan...
Britain’s economy grew an estimated 0.6 percent in the first quarter from 0.7 percent in the previous quarter, its slowest in well over a year, while U.S. growth eased to its slowest in two years at roughly the same level as Britain.
Germany and Italy have cut their growth forecasts for 2005 respectively to 1 percent from 1.6 and 1.2 from 2.1 percent.
The European data issued on Thursday also showed Finland’s economy shrinking and Belgium flat.
If you're feeling a little depressed after all of that, take two of these, and call me in the morning.
UPDATE: Calculated Risk reports on bad news from France, and the continuing woes in Japan. Capital Chronicle reacts to the retail sales slump in the U.K.