More Evidence Surfaces of Economic Weakness

October 25, 2011

Here’s an inventory of some of the data disappointments that have arisen yesterday and today.

  • Semi-annual revisions raised 2010 estimated euro area deficit- and debt-to-GDP ratios.  The euro-17 deficit equaled 6.2% of GDP, over twice the targeted limit defined the common currency area’s founding documents.  Last April, the 2010 estimated deficit ratio was 6.0%.  Government expenditures in the region amounted to 50.9% of GDP.  Some of the larger deficits were recorded by Ireland (31.3% of GDP), Greece (10.6%), Portugal (9.8%, revised from 9.1%), and Spain (9.2%).  France had a fiscal deficit ratio of 7.0% that exceeded the EUR-17 norm, and the deficit ratio of Germany was revised upward by a whole percentage point to 4.3%.  The debt ratio in the common currency area was a lofty 85.4%.  While the German and French ratios hovered very near that average, those in Portugal (93.0%), Belgium (96.2%), Ireland (94.9%), Italy (118.4%) and Greece (144.9%) were either just below or well above 100%.
  • The euro area’s composite purchasing managers index in October of 47.2 indicates a decent pace of contraction at the start of the final quarter of 2011 and is 8.4 points lower than the second-quarter mean score.
  • The Bank of Canada has penciled in assumptions of a euro area recession, weak U.S. growth, and moderating demand from emerging economies into the coming nine months.
  • Among U.S. figures reported today, the Case-Shiller and FHFA house price indices showed a more depressed housing market than thought.  The Richmond Fed index, which at minus 6 was negative for a fourth straight month, contradicted suggestions of strengthening manufacturing momentum in the Philly and New York indices reported earlier.  Chain store sales were weak last week, and monthly Conference Board gauge of consumer confidence plunged 6.6 points to a post-recession low of 39.8.  Such had printed at 64.5 six months earlier.
  • Small business sentiment in Japan, which had recovered from 36.1 in April soon after the Sendai earthquake to 47.2 in September, relapsed 0.8 points this month.  Japanese on-year export growth in September of 2.4% continued to be dwarfed by a 12.1% advance in imports.  Some 92% of the rise in imports was related to higher prices.  Export volume growth of 1.7% was actually slightly greater than the 0.9% increase in real imports.
  • EU leaders, especially pitting the two heavyweights of Germany and France against each other, continue to haggle over the size of a Greek debt haircut, the role of the ECB in financing the bailout fund, and the size of that war chest.  Market players have picked up the cue from economic analysts that a Greek default cannot be avoided.  If the self-perpetuating cycle of fiscal austerity and declining economic growth isn’t broken, it’s only a matter of time before some other troubled economies in the group join Greece in the insolvency camp at least from a market perception standpoint.

Copyright 2010, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.


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