Europe Economic Seesaw Continues

If there's one lesson to be learned from the current economic malaise, it's that everything has an unpredictable side. Take what's happening in Europe as proof.

Last week's crazy market fluctuations touched all the major global companies and created both panic and sheer elation. In addition, the ongoing debt crisis and the European Union's bailout of struggling members have once again overshadowed the continent's recovery efforts. This time, the bad news came in the form of a productivity decline.

Last week, observers were surprised to see a slowdown in euro zone industrial production. The Wall Street Journal reported that industrial production in the 17-country euro zone fell in June at the sharpest rate in six months.

When compared with May 2011, June's seasonally adjusted industrial production dropped 0.7 percent in the euro area and 1.2 percent in the 27-country EU. In May, production rose by 0.2 percent in both zones, noted Eurostat, the EU's statistics-keeping office.

Earlier this month, a Markit survey of manufacturers across the euro area found that productivity growth was nearing stagnation and manufacturing output was contracting, putting growth activity at its weakest levels in almost two years. (Download the PDF here).

In the euro zone's biggest economies, June's industrial production fell 0.8 percent in Germany, 1.7 percent in France, 0.6 percent in Italy, and 0.8 percent in Spain, according to Eurostat.

Even so, the signals are anything but clear. Compared to June 2010, industrial production increased 2.9 percent in the euro zone and 1.7 percent in the EU, according to Eurostat. Import and export data released by Eurostat last week also produced mixed results. “The sum of EU-27 imports and exports to countries outside the EU rose by almost one quarter between 2009 and 2010. Exports recovered to a higher level than seen in 2008, while imports rose by more than exports, leading to an increase in the overall trade deficit.”

As if this wasn't becoming painfully obvious, the European Central Bank reiterated the change of pace in its monthly bulletin:

    Global economic activity has lost momentum in recent months, as evidenced by the decline in sentiment indicators. In the Governing Council’s assessment, the risks to this economic outlook for the euro area remain broadly balanced in an environment of particularly high uncertainty. On the one hand, consumer and business confidence, together with improvements in labour market conditions, could continue to provide support to domestic economic activity. On the other hand, downside risks may have intensified.

    They relate to the ongoing tensions in some segments of the euro area financial markets, as well as to global developments, and the potential for these pressures to spill over into the euro area real economy. Downside risks also relate to further increases in energy prices, protectionist pressures, and the possibility of a disorderly correction of global imbalances.

Yeah, that's sounds like a complicated way of saying, “We should all hang tight for a while longer. The roller coaster ride is anything but over.”

6 comments on “Europe Economic Seesaw Continues

  1. Daniel
    August 16, 2011

    Jennifer, you are right. We cannot predict anything in business and economy. This is because economy is depending up on many factors like crude oil pricing, inflation rate, economic stability and GDP growth etc. This all have its own impact in share market also, so any change in this chain can make tremendous change in the equilibrium with a direct impact in purchase power. In most of the cases, negative news may get much populated and effects the economic system rapidly.

  2. Eldredge
    August 16, 2011

    A sharp, albeit short timeframe, decline is not good news. Let;s hope its a blip, and not a general trend.

  3. jbond
    August 16, 2011

    It seems like everybody is on some sort of a roller coaster ride these days. The only difference is how big and twisty of a ride you’re on. It's amazing how forecasters can create a negative shadow on things, when they aren't as bad as the picture is painted. Take for instance the growth numbers. They are stating how they are down % points from the previous month or what was anticipated, yet they are up overall from the previous year. It is very hard to predict numbers like this and even harder to get them right. Let's all hope this global roller coaster turns into a kiddy ride at the local fair. 

  4. Barbara Jorgensen
    August 16, 2011

    I'm particularly saddened by the turmoil in London. As much as the PM claims it has nothing to do with the economy, I can't entirely believe it. Frustration is boiling over everywhere and people are feeling less empowered than ever to do anything about it. The belief in the US that you get the government you deserve is galling–partisan politics is obscuring the ability to take any real action in the government. It's a bad time for a campaign…Obama should be taking care of business rather than responding to candidates' jibes

  5. Ariella
    August 16, 2011

    Quite a lot to be frustrated about, Barbara. But, August itself may be another factor. Though the authorities quoted here are from the US, the rise in crime in August may well apply to other places.

  6. Jennifer Baljko
    August 17, 2011

    Quite frankly, I'm surprised there haven't been more global protests of the type we've already seen spread from North Africa to Europe. The whole world should be fed up with how this has crisis has played out and should be at a boiling point to push for change. Putting faith in politicians and economists has run its course (if that was really the course; I think it was more an ignorance is bliss state of being than a faith thing). Allowing executives to earn multi-million dollar bonuses while tens of thousands of workers are given pink slips should not be a sustainable way of running a company. Not that I necessary think violenty rioting in the streets provides any long-term change. They are usually highly-fueled, unorganized outburts that provide little  momentum for implementing new processes or activities; that said, I think collectively rising up does carry the weight of more voices. Basically, entire political, finance, business, and social structures need to change. If the recessionary problems we all face don't make that overwhelmingly clear, I'm not sure what will.  Just my two cents….

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.