Recession loom everywhere you look. Let’s look at France: French growth sputters to a halt in 2nd quarter
The French government was put under further pressure to cut deeper into spending after figures Friday showed growth in Europe’s second biggest economy ground to a halt in the spring, in another sign that the global economy is facing rising recessionary threats.
With the worse-than-expected French growth figures suggesting a possible budget shortfall this year, government ministers may have to find additional savings ahead of a key meeting with President Nicolas Sarkozy on Aug. 24.
The flat growth reported in the second quarter of the year was attributable to a slump in consumer spending and exports, and came as policymakers scramble to soothe investor concerns that the country could be the next major economy to lose its coveted triple-A credit rating.
Eurozone Industrial Production “Unexpectedly” Drops .7%
RTT News reports Eurozone Industrial Output Declines Unexpectedly In June
Eurozone industrial production declined unexpectedly in June on widespread decreases in sub-sectors, indicating a sharp slowdown in economic activity in the currency bloc at the end of the second quarter.
Industrial output fell 0.7 percent month-on-month, offsetting the 0.2 percent increase seen in May, data released by Eurostat showed Friday. Economists had expected production to remain flat in June.
Among the sub-sectors, durable consumer goods output and capital goods production logged the biggest falls of 2.5 percent and 1.5 percent, respectively. At the same time, non-durable consumer goods output dropped 0.5 percent. Decreases in intermediate goods and energy output came in at 0.6 percent and 0.4 percent, respectively.
Germany Industrial Production Unexpectedly Drops 1.1%
Forex Crunch reports More Evidence of Core Slowdown in Germany’s Industrial Production
German industrial production dropped by 1.1% in June. Early expectations stood on a rise of 0.1%. The rise of 1.2% that was reported for May was revised to only 0.9%. Altogether, the locomotive of the euro-zone cannot drive the train in high speed anymore.
US Consumer Sentiment Unexpectedly Declines to Three Decade Low
Confidence among U.S. consumers plunged in August to the lowest level since May 1980, adding to concern that weak employment gains and volatility in the stock market will prompt households to retrench.
The Thomson Reuters/University of Michigan preliminary index of consumer sentiment slumped to 54.9 from 63.7 the prior month. The gauge was projected to decline to 62, according to the median forecast in a Bloomberg News survey.
Estimates of 69 economists for the confidence measure ranged from 59 to 66.5, according to the Bloomberg survey. The index averaged 89 in the five years leading up to the recession that began in December 2007.
Barry Ritholtz at the Big Picture asks Are We Already in Recession?
Bloomberg reported today that “Consumer Sentiment Plunged to Three-Decade Low.”
That sent me scurrying to find some charts, and I ended up liking the two from UBS strategist Andy Lees, at bottom.
The first one is an overlay the University of Michigan consumer confidence index vs the Conference Board’s data. The second chart shows the long term history of the Conference Board data. At an implied level of 43.37 we would be in recession now; not only that but a deep recession.
As the charts show, the ABC index has diverged from the Conference Board data for some time now.
The correlation between consumer confidence and recession might not hold this time — although that would be the first split for 40 plus years.
There is also an implication from this data series that we are already in recession. Given yesterday’s data showing both imports and exports falling, we may have an implied Q2 GDP revised lower by 0.8% to 0.5% annualized growth — putting Q2 into the negative category.
Hence, it is not unfeasible that we could be the verge of recession.
Forget “verge of recession” the US is in one. Whether or not it gets reported as such depends on further data. If new data continues to be weak, the NBER is very likely to backdate a recession to June or July.
Mike “Mish” Shedlock
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