Meanwhile in Europe… (4). Mainly bad news.

from Merijn Knibbe

A chronicle of recovery and structural shifts

Eurostat has published its revised GDP estimates for the third quarter of 2010 as well as preliminary estimates for 2010. Also, new information on unemployment, inflation and industrial new orders is available. 

Only one country (Poland) shows vigorous growth and has GDP which is clearly up on the 2007 level, while only one other country (Sweden) also shows vigorous ‘recovery-growth’ (+6,8% compared with 2009-III). Despite this increase, he level of Swedish GDP is however still quite a bit below the 2007 level. Countries like Spain, Greece, Ireland, Romania and possibly Bulgaria and Slovakia are at the moment already experiencing clear signs of a ‘double dip’. Information on these last two countries feels however somewhat incoherent. Information on the UK, which does worse than the two other countries with a floating currency, is at the moment mixed: increasing unemployment and inflation, declining orders but strong October and November retail sales. These might however be due to the January VAT increases which have been announced.

	GDP, level, 2000 = 100			GDP, increase
				Growth over the	Growth over
	2007	2010		previous quarter	one year
Greater Germany	111	111		0,6	3,4
GIPSD	125	120		0,0	-0,2
Transition countries:
Baltics	176	148		0,7	2,2
Poland	132	146		1,3	4,7
Other transition	143	142		0,2	1,1
Floating currency:
United Kingdom	119	116		0,7	2,8
Sweden	123	121		2,1	6,8
Italy and France	111	108		0,3	1,4

All data: Eurostat. For the countries in the groups: see the previous edition of this blog.

Unemployment stays high in almost all countries, EU-retail sales declined with -0,8% in November while the October retail sales increase has been revised downwards from +0,5% to zero. Over the last five months, seasonally adjusted EU-retail sales, indicative for household expenditure, declined with about 1%. As tax increases and increases of energy prices and prices of fresh food cause inflation-as-we-measure-it (i.c. without asset price changes and costs of owner occupied dwellings and sales of second hand goods like famous art, existing houses and e-bay stuff) to increase. At the same time,  wage increases have been edging down for two consecutive years, real wages are falling with about 1% a year, with huge differences between the countries. In combination with other tax increases, this will cause a further decline of retail sales.

Industrial orders have equaled or surpassed pre-crisis levels only in Latvia, Estonia, Romania and Poland. In these countries, a strong increase of industrial production is indeed visible, though except for Poland production is still way (‘highway’) below pre-crisis levels and this increase  is offset by sometimes dramatic and often even historic declines in other sectors of the economy. Summarizing: the crisis is not over, a double dip for the entire EU is very possible.