Global| Jul 11 2011IP in the Euro-Area
Summary
While the growth rates of IP from 12-months and in seem different for France and Italy. But their respective growth rate paths in the recovery have been very similar. Over three-months Italy is the only country in the table with IP [...]
While the growth rates of IP from 12-months and in seem different for France and Italy.
But their respective growth rate paths in the recovery have been very similar. Over three-months
Italy is the only country in the table with IP growth accelerating. France has just broken a string of
declines in IP. Germany continues to blast out the high end on growth
In the table we can see the weakness in Spain Ireland Greece and Portugal. All of them have weak or declining quarter-to-date growth rates in their IP.
The EMU total is not yet in, but it is close to complete. The performance of industrial output reminds us that the Zone is slowing –except perhaps for Germany- and that the financially troubled countries are on the cutting edge of that slowing and their weaker growth will make it harder for them to hit their targets.
The recent imbroglio in Europe is that Italy is being sucked into the vortex of debt concerns. Italy’s 10-year notes saw yield jump by 30bp to 5.5% bulging their premium to German bond yields to 2.8% (280bp). Spain’s yields have risen at the same time to 5.90% with spreads to German bonds of 3.2% (320bp). With these two countries the third and fourth largest EMU economies are being spun into the vortex
Friday’s reluctance by PM Silvio Berlusconi to adapt further austerity was a catalyst for this recent sell off in Italian bonds.
Clearly the EMU has entered a new stage of risk. While growth is still solid, the fragmenting of IP, a monthly metric, is revealing the distress created and spread by debt concerns. Several weeks ago the IMF warned that the EMU debt problems could spread to the core and it is now hard to argue that it has not in fact done just that.
If this crisis worsens it will just get harder to deal with. Has Europe already run out of time to deal with its problem or will growth remain strong enough long enough for Europe to work its way back to solid widespread growth with a healthy Zone? The future of the Euro hangs on such an answer.
| Selected Euro-Area Countries and UK IP in MFG | |||||||
|---|---|---|---|---|---|---|---|
| Mo/Mo | 3Mo | 6Mo | 12Mo | May-11 | |||
| MFG Only | May-11 | Apr-11 | Mar-11 | May-11 | May-11 | May-11 | Q:2 Date |
| Germany: MFG | 1.3% | -0.3% | 1.1% | 8.8% | 11.2% | 8.9% | 8.5% |
| France | 2.0% | -0.5% | -0.8% | 2.6% | 5.2% | 2.6% | 0.4% |
| Italy: MFG | -0.7% | 1.0% | 0.6% | 3.6% | 2.0% | 1.8% | 7.6% |
| Spain | 2.3% | -3.4% | 0.1% | -4.2% | 0.7% | -0.8% | -11.9% |
| Ireland | 0.5% | 1.2% | -1.4% | 1.1% | 1.7% | 0.1% | -3.2% |
| Greece | 2.0% | -5.6% | -1.6% | -19.6% | -12.7% | -10.3% | 0.0% |
| Portugal | 2.8% | -3.5% | 0.8% | -0.4% | 6.1% | -0.3% | 0.0% |
| UK: MFG | 1.9% | -1.6% | 0.1% | 1.3% | 1.5% | 2.9% | -3.2% |
| Mo/Mo are simple percent changes others are at SAARs;IP X-construction unless noted | |||||||
Robert Brusca
AuthorMore in Author Profile »Robert A. Brusca is Chief Economist of Fact and Opinion Economics, a consulting firm he founded in Manhattan. He has been an economist on Wall Street for over 25 years. He has visited central banking and large institutional clients in over 30 countries in his career as an economist. Mr. Brusca was a Divisional Research Chief at the Federal Reserve Bank of NY (Chief of the International Financial markets Division), a Fed Watcher at Irving Trust and Chief Economist at Nikko Securities International. He is widely quoted and appears in various media. Mr. Brusca holds an MA and Ph.D. in economics from Michigan State University and a BA in Economics from the University of Michigan. His research pursues his strong interests in non aligned policy economics as well as international economics. FAO Economics’ research targets investors to assist them in making better investment decisions in stocks, bonds and in a variety of international assets. The company does not manage money and has no conflicts in giving economic advice.
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