Wall Street History

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Wall Street History

08/24/2012

Heading Back Into Recession

The other day, Eurostat, the official economic data collector for the European Union, released its “flash estimates” for GDP for the second quarter of 2012. Both euro area (EA17…17 employing the euro currency) and the European Union (EU27…27 member states) saw GDP fall 0.2% during the second compared with the first. Compared with the same quarter of the previous year, seasonally adjusted GDP fell by 0.4% in the euro area and by 0.2% in the EU27.

So in looking at the data I’ve picked out some selected countries that are best emblematic of what is going on across the pond.

I am listing the quarter over quarter comparisons for the last four quarters. It can be confusing sometimes when you read or hear of these numbers because when the U.S. releases its data, the headline figure is year over year, or annualized.

     Q3 2011…Q4 2011…Q1 2012…Q2 2012

Ireland… -1.1…0.7… -1.1…NA

Italy… -0.2… -0.7… -0.8… -0.7

Netherlands… -0.3… -0.6…0.2…0.2

Portugal… -0.6… -1.4… -0.1… -1.2

Spain…0.0… -0.3… -0.3… -0.4

As for Greece, its numbers are so jumbled they don’t come out quarterly…rather Eurostats gives annualized estimates for each quarter.

Greece… -5.0p… -7.5p… -6.5p… -6.2p

Austria remains one of the most stable in the EA17, with the lowest unemployment rate.

I included Czech Republic, which is not part of the EA17, as an example of the problems faced in Eastern Europe, where businesses used to get a lot of their financing from banks in Italy and Spain that have now gone underground (let alone increasingly cautious German and French ones), trying to protect their own capital.

As I noted in my last “Week in Review” column, Finland’s performance the last quarter is most worrisome, and they have a lot of clout in the EA17 in terms of determining who gets the bailout funding, i.e., Greece.

Remember, formally, Greece, Ireland and Portugal are the three currently receiving bailout funds. Spain is about to with regards to its banks, and, perhaps, soon the government itself should it request the funds as seems likely. Italy is adamant it will not request funding.

Iceland is a great example of a nation that let its banking system collapse and then rebuilt it. [It is not part of the EU but rather the European Free Trade Association (as is Norway and Switzerland).]

Don’t try to figure out why Eurostats numbers are a bit different from those released by the U.S. government. They don’t quite jive, but I’m just using exactly what Eurostat publishes.

Wall Street History returns in two weeks.

Brian Trumbore

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