Yet, economic denial runs deep. Government GDP estimates in Spain and Italy are preposterous, as are S&P growth forecasts. Let's take a look at the reports.
Eurozone Retail Sales Drop 4th Straight Month
Finfacts reports Retail sales in Eurozone fell for the fourth month in a row in August
European Economic Confidence Falls Most Since December 2008
Retail sales in the Eurozone fell for the fourth month in a row in August, according to Markit�s latest PMI (Purchasing Managers' Index). A stronger rise in German retail sales was not enough to offset weakness in France and Italy, the two next-largest euro economies. The overall rate of decline accelerated slightly to the fastest since October 2010.
The third-largest euro economy, Italy, registered another steep fall in retail sales in August. The monthly rate of contraction was broadly similar to that posted in July, remaining stronger than the long-run series average. Italian retail sales have fallen continuously for the past six months.
Retailers� inventories of goods for resale rose for the sixth month running, the longest sequence in three years. Moreover, the rate of growth strengthened to a robust pace.
Consequently, the value of goods purchased by Eurozone retailers fell slightly in August. Moreover, the volume of purchases fell more sharply, as average purchase prices continued to rise rapidly during the month. This sustained inflationary pressure, added to weak sales demand, led to a further marked deterioration in retail gross margins during August.
A combination of falling sales and cost pressures led retail employment to slow almost to a halt in August. Latest data marked a third successive month of net job creation in the sector, but at only a negligible rate.
Bloomberg reports European Economic Confidence Falls Most Since December 2008
European confidence in the economic outlook plunged the most since December 2008 this month as a persistent debt crisis roiled markets and clouded growth prospects across the 17-nation euro region."Hard Fall" in Spain
An index of executive and consumer sentiment in the single- currency region fell to 98.3 from a revised 103 in July, the European Commission in Brussels said today. That�s the lowest since May 2010. Economists had forecast a decline to 100.2, according to the median of 29 estimates in a Bloomberg News survey. In the U.S., consumer sentiment dropped to the lowest level in more than two years, a separate report showed.
The euro area�s economic prospects are deteriorating as national governments cut spending in a bid to narrow deficits and tackle the debt crisis. Economic and Monetary Affairs Commissioner Olli Rehn signaled yesterday that the EU may reduce its 2011 growth forecast from 1.6 percent on concerns that financial turbulence could spill into the broader economy.
In Spain, via Google translate Tourism only Saving Grace in Economic Debacle here are some bullet points I gathered.
- Director of a major research service says the Spanish economy is in a "hard fall"
- Cement consumption is down 20%
- Electricity consumption down 1%
- Private sector spending fell 3.6%
- Tourism is up but hotel prices are at 1995 levels
- Unemployment still rising
"Nothing indicates that between August and November, things will change for the better, as indicated by the index of economic sentiment. The slowdown in economic activity in the European Union (to which targets 65% of Spanish exports) anticipates a slowdown in overseas sales.
The Government fears the worst, mainly due to the stagnation of private consumption, dependent on the creation of employment and compensation of employees. And none of these variables shows signs of recovery."
Eurozone GDP .2%, Leading Indicators Negative
Balkans Business News reports The Eurozone GDP fell short of expectations
Eurozone GDP growth below expectations in 2Q. Data for the US had already disappointed earlier. The Eurozone GDP reading - at 0.2% - fell short of expectations as well (0.4% q/q). In particular, very slow growth in Germany and stagnation in France have been a drag on growth.GDP Forecast +1.8% 2011, +1.6% 2012!?
Asia did not contribute to y/y growth any further in this month. In fact, Europe was the only destination contributing at all (both within and outside of the Eurozone). This seems likely to be the most important explanation for the German growth slowdown, as exports have been one of the main growth drivers so far.
Leading indicators are not on bright side, either. The global growth slowdown is already reflected in lower y/y growth rates of Eurozone industrial production. In addition, the OECD leading indicator has - similar to the ZEW Index in Germany - turned negative. Hence, it seems likely that industrial production growth will lose steam too. Inventories of finished goods have increased as well, which is a negative signal, even beyond lower production expectations. Sentiment on financial markets could be drag on private consumption, too. Private consumption is not an important growth driver in the Eurozone. However, a deterioration of sentiment could be dampening final demand.
The extremely weak economic growth in Italy does not seem sufficient to lower Italian unemployment significantly in the coming year. Even in countries that are in better economic shape, such as Germany, slower growth will slow down the recovery on the labor markets, too. We therefore expect the decline in the unemployment rate to be even more gradual than expected so far.
In spite of that horrendous news optimism reigns supreme as the following paragraph shows:
We have revised our 2011 GDP forecast for the Eurozone from +2.0% to +1.8%. Additional austerity measures by governments as a result of the recent turbulence on the financial markets, as well as the weak sentiment, should also dampen economic growth in 2012. Hence, we also slightly revise our GDP growth forecast for 2012 from +1.6% to +1.4%.I have no idea how you get any growth out of this horrendous mix, let alone fantasy projections of 1.8%, but the S&P has the same conclusion.
S&P Fantasyland Forecast
Please consider S&P trims euro zone growth outlook
Ratings agency Standard and Poor's lowered its economic growth forecasts for the euro zone on Tuesday, but said the shared currency bloc was not headed toward a new recession.S&P economic forecasts do not seem any better than their debt ratings. Country by country I will take the "under" line vs. S&P estimates. Odds are strong Europe is already in a recession, and these guys cannot see one coming.
Public and private institutions have been scrambling to revise down their growth outlooks for Europe as a stream of weak data have pointed to sharply slowing activity in recent months.
S&P said in a new report it forecast growth of 1.7 percent in 2011 and 1.5 percent in 2012, down from estimates in July of 1.9 percent and 1.8 percent respectively.
For Germany, Europe's biggest economy, S&P cut its 2012 forecast to 2.0 percent from 2.5 percent previously, down sharply from the 3.3 percent it expects to see this year.
It trimmed its forecasts for France to 1.7 percent in 2011 and 2012, in line with recently downwardly revised French government estimates. Previously, S&P had forecast the euro zone's second-biggest economy would grow 2.0 percent and 1.9 percent in 2011 and 2012 respectively.
S&P cut its 2012 outlook for Spain to 1.0 percent from 1.5 percent previously, still better than the 0.8 percent growth it forecasts for 2011.
Outside the euro zone, S&P trimmed its forecast for Britain, estimating its economy would grow 1.3 percent in 2011 and 1.8 percent in 2012, down from 1.5 percent and 2.0 percent respectively.
Despite the bleaker outlook, S&P did not see Europe sinking back into recession.
"We continue to believe that a genuine double dip will be avoided given the still existing avenues for growth, although we recognize that downside risks are significant," S&P said in a report. "In particular, we will closely monitor trends in consumer demand over the coming quarters," it added.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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