New Euro Area Public Finance Figures Released

April 26, 2011

All markets are again open following the Good Friday/Easter holiday break.  Today is the 25th anniversary of the Chernobyl nuclear accident near Kiev.

Commodity price gains have been trimmed following their sharp run-up in recent days.  Gold at $1505.20 per ounce is 0.9% below yesterday’s peak of $1518.32.  Oil is off 0.2% at $112.03 per barrel.

The dollar is mostly easier, with drops of 0.5% against the Swissy, 0.4% versus the kiwi, 0.2% against the euro and Australian and Canadian dollars, and 0.1% relative to the yen.  Otherwise, the greenback is unchanged against the yuan and up 0.1% versus sterling.

The yields on ten-year British gilts and Japanese JGBs slid by two basis points and one bp, while that for German bunds is steady.

Symptomatic of this day with no single unifying theme, stocks have fallen in Asia but arisen in Europe.  The Japanese Nikkei lost 1.2%, and share prices fell by 0.8% in Thailand, 0.6% in China, 0.5% in Singapore and Hong Kong, and 0.4% in Indonesia and South Korea.  The German Dax, however, is up 0.4%, and the Paris Cac and British Ftse have advanced 0.3% each.  Highest honors go to Australian stocks, which show a 1.1% gain.

Deficit and debt ratio data were released by Eurostat, the statistical agency of the EU.  Euroland’s deficit-to-GDP ratio, which rose from 0.7% in 2007 to 2.0% in 2008 and then 6.3% in 2009, settled back to 6.0% last year.  The ratio for Greece fell to 10.5% from 15.4% in 2009.  For Ireland, however, such leaped to 32.4% from 14.3% in 2009.  Portugal’s ratio was 9.1% after 10.1% in 2009, and Spain’s fell to 9.2% from 11.1%.  Among Euroland’s big three, the deficits in 2010 equaled 3.3% of GDP in Germany, 7.0% in France, and 4.6% in Italy.  Government spending in the euro area equaled 50.4% of GDP last year versus 45.9% in 2007 before the Great Recession, while tax revenue were 44.0% of GDP, the same as in 2009 and down from 44.8% in 2007.

Despite a decline in the deficit ratio, outstanding debt continued to crest, reaching 85.1% of GDP in 2010, up sharply from 79.3% in 2009, 69.9% in 2008, and 66.2% in 2007.  Greek debt is at 142.8% of GDP compared to 127.1% in 2009 and 105.4% in 2007.  A top German economic advisor, Feld, said today that a near-term restructuring of Greek debt appears unavoidable to him.  Ireland may not be far behind, given the alarming increase of its debt to 96.2% of GDP in 2010 from 65.6% in 2009, 44.4% in 2008 and 25.0% in 2007.  Portuguese debt stands at 93.0% of GDP, up from 83.0% in 2009, 71.6% in 2008, and 68.3% in 2007.  Spanish debt is more contained at 60.1%, but such has also climbed sharply from 53.3% in 2009 and 36.1% in 2007.  Moreover, Spain constitutes 11.5% of Euroland GDP compared to 6.2% for Greece, Portugal and Ireland combined.  Italy, which represents 16.8% of the common currency area’s GDP, has a debt ratio of 119.0% versus 103.6% in 2007.  Even German debt is uncomfortably high at 83.2% of GDP versus 64.9% in 2007.  France and Belgium have debt ratios of 81.7% and 96.8%.

The U.K., which is in the EU but not the euro area, had deficit and debt ratios last year of 10.4% and 80.0%.  The business advocate, CBI, released its monthly survey of industrial trends, which showed a deteriorated reading in April of minus 11 after having improved to plus 5 in March from minus 8 in February and minus 16 in January.

The devastating impact of the Sendai earthquake on household spending was reflected in Japanese department store sales that were 14.7% weaker than a year earlier in March after posting an on-year rise of 0.7% in February.  Tokyo department store sales plunged 21.5% from a year earlier in March.

Industrial production in Singapore leaped 22.0% both on month and on year in March following a 2.0% drop in February.

Australia’s index of leading economic indicators, calculated by the Conference Board, rose 0.6% in February after a 0.1% uptick in January, but the coincident index was unchanged in the latest month.

Czech business sentiment printed in April at 11.9, up from 13.6, and consumer confidence there improved a point to minus 18.  Dutch business confidence slid to 4.6 in April from 5.8 in March.

The Swiss trade surplus narrowed 56% in March to CHF 1.09 billion from CHF 2.49 billion in February, but the first-quarter surplus of CHF 5.45 billion was close to that a year earlier of CHF 5.29 billion.  The UBS Swiss consumption indicator improved by 0.204 to 1.660 in March after falling in both January and February.  Seasonally adjusted Swedish unemployment inched upward to 7.7% in March from 7.6% the month before; the unadjusted figure of 8.1% compared to 9.0% in March 2010.  Irish producer prices dipped 0.2% in March and were just 0.9% above a year earlier.

The FOMC starts a two-day policy meeting today.  Note that it’s announcement tomorrow will be at 12:30 EDT.  A press conference by Chairman Bernanke is set to begin at 14:15 EDT and last until about 15:00 EDT tomorrow.  Meanwhile today, scheduled U.S. data releases include weekly chain store sales, the Richmond Fed factory index, the Case-Shiller house price survey, and consumer confidence.

Copyright Larry Greenberg 2011.  All rights reserved.  No secondary distribution without express permission.

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