Europe - Economic Data & News 01 (May 08 - Oct 08)

[millionairemind]

UK services industry shrinks for fourth month
By Angela Monaghan
Last Updated: 10:59am BST 03/09/2008

The services industry has shrunk for a fourth successive month, in the latest sign of economic weakness in the UK.

The sector, which accounts for around three quarters of UK economic output, improved its growth slightly in August but remained in negative territory, the Chartered Institute of Purchasing and Supply's (CIPS) Services Purchasing Managers' Index shows.

However, economists said while the PMI level of 49.2 points was still below the 50 point which separates expansion from contraction, its improvement from July's 47.4, adds weight to the view that the Bank of England will leave interest rates on hold tomorrow.

Incoming new business showed a slight improvement, falling at a slower rate than July. Nevertheless the backlog of work declined sharply last month. The CIPS Incoming New Business Index came it at 47.1, above July's all-time survey low of 44.7.

Repeating the trend, employment fell for a fourth consecutive month, albeit at a slower pace, with job cuts most prevalent among hotels and restaurants.

The survey will bring modest relief on inflation to the Monetary Policy Committee as it starts its two-day meeting today, underlined by a fall in service sector input prices and prices charged.

"This suggests that muted service sector activity is increasingly diluting companies' pricing power, while lower oil prices are easing some of the pressure on companies' costs," said Howard Archer, chief economist at Global Insight.

The MPC is not expected to cut interest rates tomorrow but the survey will afford it some room to consider rate cuts in the future as pressure on the UK economy persists.

The OECD gave a stark warning yesterday that the UK is already in recession, triggering a further sell-off of the pound which slumped to a new 16-year low.

Meanwhile, British consumer confidence held at the lowest level in at least four years in August after economic growth stalled, Nationwide Building Society said.

An index of sentiment taken from the responses of 1,000 people in a survey stayed at 52, the same as in July, which was the lowest since the survey began in May 2004, the mortgage lender said.

[millionairemind]

Britain's economy
How bad is it?
Sep 4th 2008
From The Economist print edition

Not as wretched as the doomsters claim; but reviving the British economy will take time

“THE nine most terrifying words in the English language”, Ronald Reagan is held to have said, “are: ‘I’m from the government and I’m here to help.’” If only Gordon Brown had listened. The prime minister’s plan, revealed on September 2nd, to keep Britain’s troubled £4 trillion ($7 trillion) housing market “moving forward” by advancing some £1.6 billion-worth of help to first-time buyers, purchasers of modest properties and homeowners struggling to meet their mortgage payments was never going to be more than cosmetic. In the event it mixed a few sensible ideas (faster help for those whose banks threaten to repossess their houses) with a few dotty ones (luring first-time buyers into a falling market). But the overall effect was minimal.

The details of Mr Brown’s housing plans are the least of his problems. A few days before their announcement, his chancellor of the exchequer, Alistair Darling, hijacked the headlines for a week when he said that economic times were the worst in 60 years. Mr Darling gamely maintained later that he had been talking about prospects for the world, not for Britain in particular. But before that dog had even tried to hunt, the OECD, a rich-country think-tank, released a widely reported assessment of the outlook for the world’s seven biggest economies. Britain, it reckons, is the only one facing recession (two quarters of negative growth) this year. This called into question Mr Brown’s oft-repeated claim that economic woes are global, and well-managed Britain is better placed than most to deal with them.

The good, the bad and the ugly
That the British economy has serious problems is pretty obvious. Britain’s housing bubble was more dangerously inflated than most countries’; its households are more indebted; financial services account for a bigger share of its economy; and its government, thanks in large part to Mr Brown, spent with both hands during long years of unremitting economic growth, leaving little scope for fiscal fine-tuning now.

So the bad news is clustering thick and fast. The economy stagnated in the three months to June. Gloomy forecasts come not just from think-tanks: the governor of the Bank of England says that growth will be flat for a year. Sterling has lost 15% of its trade-weighted value over the past year, and 5% over the past month. Consumer-price inflation is widely expected to hit 5% this year (more than twice its official target), though the sharp drop in oil prices may blunt that spike. Unemployment is edging up. And the housing market is collapsing: prices have fallen by 11% in a year, and the number of new mortgage approvals in July was 71% lower than the same month last year.

The picture looks even more dismal compared with the United States. The American economy is growing again, the dollar is bouncing back and some people even reckon the housing crisis has touched bottom. Whether this is mainly owing to a $180 billion fiscal handout (whose effects may fade), America’s inexhaustible energy and now-flourishing exports, or the simple fact that it stumbled earlier is a matter of debate. Whatever the answer, Britain’s prospects appear grim in comparison.

But the worst outlook in six decades? Nonsense. Britain is not going to return to the rationing of the 1940s, the three-day working week and 25%-plus inflation of the 1970s, or the 3m unemployed of the early 1980s. Nor does Britain look so bad in comparison with the neighbours. The somewhat flaky OECD report was sexed up in the retelling (see article); and, while Britain is teetering on the brink of recession, the euro zone is already shrinking.

So Mr Brown is right to point out not only that others share Britain’s suffering (see article) but also that there is a resilience to its economy. That’s partly because Britain’s labour and product markets are more flexible than many of its neighbours’: the labour market has a safety valve in the form of the 1m workers who arrived from central and eastern Europe over the past four years and are now beginning to go home. And it is also because high energy prices, while hurting consumers, boost government revenues thanks to the remnants of North Sea oil and gas production. What’s more, even though Mr Brown has played fast and loose with the rules for fiscal prudence he put in place, they nevertheless make it harder for him to spend as wildly as some of his predecessors did on finding themselves in a fix.

But Mr Brown, an arch meddler, is wrong to suggest that the government can or should make it all better. A certain amount of fiscal stimulus is working its way through the system now: some £2.7 billion will be paid next month to taxpayers who lost out when the 10% tax band was abolished from April; and benefits rise and tax receipts fall automatically when the economy turns down. But setting out to spend significantly more or tax significantly less would be risky, even if the state of the public finances permitted it. A big fiscal-stimulus package would tend to push prices up and thus make it hard for the Bank of England to reduce interest rates. The Bank kept its base rate at 5% this week, but it will be looking to cut before long.

No goodies, please
The truth is that Britain is simply going to have to take it on the chin for a while. There is no easy fix, no return to the days of plucking credit cards and mortgages off trees. Sterling was overvalued; it is now falling; in time exports will respond (perhaps quite a long time, as Britain’s main export market is sluggish Europe). Housing was grotesquely overpriced; prices are slumping; in time they will reach a level at which poorer young Britons can buy themselves a home. These are painful but necessary realignments.

The principal danger now is not economic but political. Sterling fell on September 1st because Mr Darling revealed not new truths about the economy but divisions and indecisiveness at the heart of government. Twenty points behind in the opinion polls, Mr Brown is understandably searching for some goodies to hand out. Fortunately, the ones he produced this week will make little difference. When he finds some that do, start worrying.

[millionairemind]

FTSE 100 suffers worst week in six years
By Edmund Conway, Economics Editor
Last Updated: 11:23pm BST 05/09/2008

London shares have suffered their worst week in six years following a slew of dismal economic news which apparently leaves Britain in the mouth of a recession.

The FTSE 100 index of leading equities is now pricing in a UK recession, experts said, after the index dropped 121.40 points to 5240.70. The 2.3pc fall brings to total drop over the past week to 7pc - the biggest weekly fall since the midst of the dot-com bust.

The fall in share prices crowned a dismal week for the economic outlook, starting last weekend with Alistair Darling's comments that Britain is faing the worst set of economic challenges in 60 years and culminating yesterday with news that unemployment in the United States has topped 6pc for the first time in five years.

The FTSE's plunge was mirrored elsewhere around the world, with the Dow Jones Industrial Average dropping 142.97 points to 11045.26 points in late trading and Germany's DAX index down 152.13 points to 6127.44.

[millionairemind]

Sep 7, 2008
Economic squeeze hit 'rock bottom'
ROME - THE president of the European Central Bank (ECB) said on Saturday that the economic squeeze has 'hit rock bottom', telling Italian television that he expects a 'gradual revival' over the course of 2009.

'Going by our calculations, just published, during the second and third quarters of this year, we hit rock bottom,' Mr Jean-Claude Trichet told RAI 1 on the sidelines of an economic forum attended by political leaders at Lake Como, Italy.

The eurozone economy contracted 0.2 per cent in the second quarter of 2008, and finance ministers from France and Belgium called again this week for the ECB to consider measures that would boost economic activity when it determines the level of interest rates for the 15-nation zone.

The ECB left its main lending rate unchanged at 4.25 per cent on Thursday and Mr Trichet's comments at a subsequent press conference implied it would remain steady for some time.

He underscored the need to prevent a second round of inflationary pressures that might be created by strong wage demands and said that the current inflation rate of 3.8 per cent was cause for concern.

Many analysts nonetheless forecast an easing of ECB monetary policy in the first half of next year as the central bank is forced to respond to slowing growth. -- AFP

[KimHuat]

Code: Select all

LONDON MARKETS
LSE trading suspension halts U.K. stock surge
London Stock Exchange halts trading amid connectivity problems
By MarketWatch
Last update: 5:47 a.m. EDT Sept. 8, 2008Comments: 2LONDON (MarketWatch) -- U.K. stocks rallied early on Monday on relief over the U.S. government's plan to seize mortgage giants Fannie Mae

[ishak]

Europe flirting with recession: EU
The commission cut its eurozone growth estimate for the whole of 2008.
AFP, Sep 10, 2008

The 15 countries sharing the euro are teetering on the brink of recession but should just escape the worst, the European Commission said on Wednesday, slashing its economic forecasts for this year.

However Germany, the eurozone's largest economy which contracted 0.5 percent in the second quarter, and Spain will not be so lucky, falling into recession as growth falters badly.

Britain, outside the eurozone, will share the same fate, according to estimates from the European Union's executive arm.

The commission cut its eurozone growth estimate for the whole of 2008 to 1.3 percent from a forecast of 1.7 percent given in April, marking an even sharper slowdown from the solid 2.6 percent growth recorded last year.

"The economic slowdown will be quite pronounced and longer than initially foreseen," said Luxembourg Finance Minister Jean-Claude Juncker, who chairs regular meetings of his eurozone counterparts.

"I could see risks of a technical recession beginning to loom over the zone," Juncker told lawmakers at the European Parliament.

After the eurozone economy contracted 0.2 percent in the second quarter, the commission predicted it would stall in the third quarter and expand only 0.1 percent in the final three months.

If that forecast bears out, it would mean that the eurozone will be spared a technical recession, which economists define as two consecutive quarters of contracting economic activity.

However, Germany -- Europe's biggest economy -- was lurching into recession and Britain and Spain would follow in the second half of the year. France and Italy, despite slowing growth, would be spared, it said.

"The continuation of the turmoil in the financial markets one year on, the near doubling of energy prices over the same period and the correction in some housing markets have had an impact on the economy," EU Economics Commissioner Joaquin Almunia said.

The commission also forecast that the 27-nation EU economy would grow only 1.4 percent this year, down sharply from the 2.0 percent it had predicted in April.

While growth was seen slumping, inflation was forecast to remain high, estimated at 3.6 percent this year in the eurozone, well above the European Central Bank's comfort zone of close to but less than 2.0 percent.

"Despite the growing risk of eurozone recession, the European Central Bank is currently giving no sign at all that it is anywhere near to cutting interest rates given current well above-target inflation," said economist Howard Archer at consultants Global Insight.

While consumers and businesses may not be able to count on easier interest rates, Almunia said "the recent fall in oil and other commodity prices and the easing up in the euro exchange rate have provided some relief."

Oil prices have steadily fallen to about 100 dollars a barrel after hitting record highs above 147 dollars in July while the euro has also lost ground, falling from a record 1.60 dollars that month to about 1.41 dollars.

ECB President Jean-Claude Trichet said that the development of oil and food prices in the months ahead would be crucial to how well the eurozone economy copes with sharply slowing activity.

"The current episode of weak economic growth is expected to be followed by gradual recovery, in particular if a fall in oil prices from a peak in July helps strengthen real disposable income," he told lawmakers at the European Parliament.

The ECB is currently forecasting eurozone growth this year of 1.1-1.7 percent followed by 0.6-1.8 percent in 2009.

EU finance ministers and central bankers are to meet on Friday and Saturday in Nice, southern France, for talks focused on how to respond to the economic slump and financial market turmoil.

However, Europe's options for stimulating the economy are limited since the ECB is unlikely to cut interest rates soon and few countries have room to increase spending because of already strained budgets.

[kennynah]

you lose, i win... and that's how the fx pairs work in a gist....

thus the recent aggressive strength in USD vs Euro

as an aside...sgd is 1.43 against usd... we've weakened quite a bit in 6 months...from a high of 1.34

[millionairemind]

Be careful.. something is not quite right.

Junk Bond Distress Levels Surge, Signaling Defaults (Update1)

By John Glover

Sept. 11 (Bloomberg) -- More than 30 percent of European high-risk, high-yield bonds are trading at distressed levels, the most in five years, stoking speculation defaults will rise.

Investors demand an extra yield over government debt of more than 10 percentage points to hold 53 of the 169 bonds in Merrill Lynch & Co.'s Euro High Yield Constrained Index. That's the biggest proportion of distressed debt since March 2003, in the aftermath of the Sept. 11 terror attacks and the dot-com crisis.

Full Story
http://www.bloomberg.com/apps/news?pid= ... refer=home

[kennynah]

ok...alot of noise about europe

when hugo boss suits get cheaper..then i will know the impact is very great

[kennynah]

same old dismal news out of europe

*********
Euro zone Employment Growth Slows in Second Quarter
9/12/2008 5:15 AM ET

(RTTNews) - The rate of growth in the number of employed in the euro zone region slowed in the second quarter, according to Eurostat, the statistical office of the European Union. The number of employed in the euro area rose 0.2% in the second quarter to 283,000 persons.

In the first quarter, the employment growth was 0.3%. Meanwhile, employment grew 1.2% year-over-year in the second quarter, slower than the 1.6% growth in the first quarter.