Signs of sluggish second−half growth appear clearly in Europe
International Trading
THE TECHNIQUE OF GIVING A GOOD MASSAGE
14 years ago
Saturday, September 25, 2010
, Posted by Usman Ali Minhas at 10:56 AM
After the remarkebel improvement witnessed from European economies in the first two quarters, the recent data is providing vivid clues that recovery is losing steam.
This week, downbeat data came first from the UK as mortgage approvals slid for the third month to the lowest level in 16 months to 45 thousands in August from 47 thousands in July, while Rightmove Plc said average asking prices for UK homes dropped 1.1% in September to 229,767 pounds, marking the weakness in the housing sector that triggered that global crisis in 2008.
BoE Chief Economist Spencer Dale said “The U.K. economy continues to recover from the effects of the financial crisis.”
Another lackluster data showed that UK's budget deficit rose to the highest level since at least 1993 reaching 15.3 billion pounds in August relative to the revised deficit of 2.0 billion pounds.
The grim deficit data renewed concerns regarding the sovereign debt crisis in Europe especially amid the announced emergency budget on June 22 while David Cameron will introduce new departmental cuts next month.
However, the main clue was after the BoE minutes which although did not witness any monetary change but kept the door opened for possible rise in the stimulus if needed, which raised alerts that the recovery is still weak and threatened that inflation will not come near target any soon.
The Confederation of British Industry (CBI), the largest business lobby in UK, lowered its growth forecasts for 2011 to 2% instead from June's projections of 2.5%, while raised growth projections for the current year slightly to 1.6% from 1.3%.
Also, it predicts the BoE to keep borrowing unchanged till the second quarter next year where it will reach 1.25% by the end of next year.
In the euro zone, the economic situation is suggesting a slowdown as Euro zone manufacturing eased its expansion in September to 53.6 compared with the prior 55.1, whereas services also plunged to 53.6 from the prior 55.9.
Even the rise in confidence reported in Germany does not alter the situation as the outlook gauge still slumped suggesting the pressures prevail over the course of the year.
Even if the economic conditions in the 16-nation bloc are better than other major economies, it will probably be impacted by possible doldrums in the United States, where the Fed also announced the probability of pumping money into markets if necessary.
Highly indebted European economies such as Ireland, Portugal and Spain continued their bond selling to finance the skyrocketing debt which managed to restore confidence temporarily in the market giving a lift to the European common currency whish jumped to six weeks high against the dollar.
Moreover, European leaders resumed their intervention to overhaul the financial system that collapse rapidly in 2008 as they approved establishing new financial watchdogs to monitor banking sector, financial markets and the insurance and pensions industry through three supervisory bodies to ensure the ability of European economies to absorb future financial shocks which came in line with the Basel Committee proposals to raise banking capital requirements announced last week.
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