Post by Bozur on Aug 10, 2008 12:33:11 GMT -5
Off the Charts - A Threat of Recession for Economies of Europe ...
By FLOYD NORRIS. Published: August 8, 2008.
A PLUNGE in orders for German exports this week increased fears that Germany, and much of Europe, ...
August 9, 2008 - By FLOYD NORRIS -
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Off the Charts
A Threat of Recession for Economies of Europe
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By FLOYD NORRIS
Published: August 8, 2008
A PLUNGE in orders for German exports this week increased fears that Germany, and much of Europe, is slipping into recession. When preliminary figures for second-quarter economic growth are released next Thursday, most economists expect that nations using the euro will show a decline in economic activity.
With Japan also expected to post a negative figure for second-quarter growth when it reports on Wednesday, and the economy already weak in the United States, the three major world economies are all stumbling, which cannot be good news for the emerging (and growing) economies like China and India.
“It now looks likely that the euro zone will be the first major economy to fall into recession,” Jonathan Loynes, the chief European economist for Capital Economics, wrote after the report of sagging orders in Germany.
Mr. Loynes was relying on a popular definition of recession — two consecutive quarters of declines in gross domestic product, adjusted for inflation. In the United States, the official measure is more complicated, relying in part on judgment of experts at the National Bureau of Economic Research. Some economists think the experts will eventually conclude that a recession has already begun.
Germany has remained the world’s largest exporter even with the rise of China, which passed the United States in 2007. Germany’s reliance on exports makes the data on new orders among the most watched. The figure for June, reported this week, was down 2.9 percent from May and was 8.4 percent below the figure from a year ago.
Order figures can be volatile from month to month. But June was the seventh consecutive monthly decline, and some economists had expected a rebound from a particularly weak May figure. “The export machine has been working very well,” said Elga Bartsch, an economist who follows Germany for Morgan Stanley. “Now it is slowing.”
The accompanying chart smooths out the order figures by showing the annual change in three-month moving averages, for both domestic German orders and for export orders. It is the export orders that are especially weak now, particularly for shipments to other countries that use the euro, as weakness in those countries spreads to Germany. Within export orders, capital goods orders are the weakest, a fact that could foretell a significant problem for German industry if it continues.
Consumer sentiment has taken a distinct negative turn in recent months. The other chart shows the sentiment regarding the economy in the 15 countries that use the euro. It has rarely been very good in recent years, but optimism outpaced pessimism a year ago.
The index is based on answers to a question regarding the economy over the next 12 months, with respondents given three choices: that the economy will improve, stagnate or decline. A figure of 100 would indicate all respondents expected improvement, while negative 100 would indicate all expected deterioration. A figure of zero shows that those expecting good news equal those expecting bad news.
For the euro area, the figure has fallen to negative 29.7, the lowest it has been since 1993.
Germans, by that measure, are relatively optimistic, at negative 16. It is the southern tier of euro countries that are the most pessimistic, with Greece at negative 60, Portugal at negative 51 and Spain at negative 37. Outside the euro zone, British consumers are also very fearful, at minus 50.
Read Floyd Norris’s blog at nytimes.com/norris.
www.nytimes.com/