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Economy in Brief

IP Drops Sharply in the Euro Area's Early Reports
by Robert Brusca March 10, 2009

IP drops sharply – Record drop in France
Industrial production continues to show steep declines in the Zone. France reported the largest decline to day since 1990 when the INSEE series first began. Spain’s volatile index fell by 8.4% in January. Italy’s index dropped by 2.8%. For these three countries of the EU, three month declines in output range from an annual pace of -45% in Spain to -26% in France. Over the past year Spain is off by 23% while France and the UK see IP however by about 13%. Quarter-to-date in January of 2009 IP is falling at an annual rate drop of greater than 20% in each of these countries and as much as -35% in Spain.

Europe is STILL in denial: What? Me worry?
Despite all this and despite new warnings of slower growth and a global decline in growth from the IMF Europe seems distant. Trichet sounds upbeat. Weber says there is no reason for the ECBs key lending rate to go below 1%. Europe has spurned the US request for more stimulus. The German’s have tuned a cold shoulder to France’s idea of cutting back the VAT tax. Yet the EU commission, that bastion of fiscal responsibility, is issuing a warning to Germany about excess spending.

Alfred E Newman meets Euroland: Europe is not on the same page as the IMF, the World Bank, or the US. Economists in the US are talking about the prospect of DEPRESSION. In Europe they are ‘la tee da’ about the downturn treating it like a minor inconvenience, not even as the powerful recession that it clearly is, let alone acknowledging the risk of worsening. The EU Commission is concerned about the Mass-Trick criterion for debt to GDP and about annual fiscal deficits as if Europe were out of sorts with its fiscal pledges in a boom year. A boom year it is not. Europe is in denial from the EU Commission to the ECB itself.

The industrial output index is not out of touch. It is taking noting lightly, it is taking it on the chin. And that raises some issues for Europe if policy is not going to be responsive to its clearly deteriorating situation.

Main E-zone Countries and UK IP in MFG
  Mo/Mo 3-Mo 6-mo 12-mo Jan-09
MFG Only Jan-09 Dec-08 Nov-08 Jan-09 Jan-09 Jan-09 Q-2-Date
France: IP excl Construction -3.1% -1.5% -2.8% -26.0% -21.3% -13.8% -26.9%
Spain -8.4% 3.8% -9.5% -45.1% -38.0% -23.7% -34.7%
UK -2.8% -1.9% -3.0% -26.8% -19.9% -12.8% -23.2%
Mo/Mo are simple percent changes others are at SAARs
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