Saturday, 15 November 2008

Euro area in recession, US probably too

The euro economy is in recession. Bloomberg reports:

Europe's economy fell into its first recession in 15 years in the third quarter, paving the way for deeper cuts to interest rates and taxes amid the worst financial crisis since the Great Depression.

Gross domestic product in the 15 euro nations shrank 0.2 percent from the previous three months, when it also contracted 0.2 percent, the European Union's Luxembourg-based statistics office said today. The two quarters of contraction -- the result of this year's surges in the cost of credit, the euro and oil prices -- mark the first recession since the single currency was introduced almost a decade ago...

The German economy, Europe's largest, contracted by a bigger-than-expected 0.5 percent in the third quarter, confirming it has entered its worst recession in at least 12 years, its government said yesterday. Ireland and Italy have also slipped into recession this year, while Spain's economy contracted in the third quarter for the first time in 15 years. Growth in the Netherlands and Portugal stagnated.

Bucking the trend, French GDP unexpectedly expanded 0.1 percent from the second quarter, when it shrank 0.3 percent. Economists had forecast a contraction of 0.1 percent...

Separate figures today showed that inflation in October eased to 3.2 percent from 3.6 percent in September, matching an initial estimate on Oct. 31. Energy-price inflation cooled from 13.5 percent to 9.6 percent, the lowest since December.

The US economy looks like it is in recession too. From Reuters:

The Commerce Department said on Friday that retail sales slumped 2.8 percent in October to a seasonally adjusted $363.7 billion, the largest decline since the department's current methodology was adopted in 1992, as mounting unemployment hit shoppers' appetites...

Sales excluding autos fell a record 2.2 percent in October versus a forecast of a 1.2 percent decline.

Lower gasoline prices, as crude oil retreated sharply from a July peak around $147 a barrel, helped depress sales at gas stations by a record 12.7 percent in October. As a result, a closely watched core measure of retail sales excluding autos and gasoline fell 0.5 percent in October.

There is a silver lining, faint though it may be.

A separate Reuters/University of Michigan November survey of consumers showed that confidence unexpectedly rebounded from a record October drop as tumbling gas prices offset worries about the economy...

The Reuters/University of Michigan Surveys of Consumers said its confidence index edged up to 57.9 in November from 57.6 in October. Despite the rise, sentiment remains at depressed levels, with the index below the lowest levels hit during the depths plumbed during the last two recessions.

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