The eurozone economy slowed in the second quarter. Bloomberg reports:
European economic growth slowed more than economists forecast in the second quarter as Germany’s recovery almost ground to a halt amid the worsening sovereign- debt crisis.
Gross domestic product in the 17-nation euro area rose 0.2 percent from the first quarter, when it increased 0.8 percent, the European Union’s statistics office in Luxembourg said in a statement today. That’s the worst performance since the euro region emerged from a recession in late 2009. Economists had forecast the economy to expand 0.3 percent, according to the median of 34 estimates in a Bloomberg News survey.
The slowing economic growth exacerbates sovereign debt concerns. A meeting between the German and French leaders on Tuesday did little to alleviate those concerns in the near term. From Bloomberg:
German Chancellor Angela Merkel and French President Nicolas Sarkozy rejected an expansion of the 440 billion-euro ($633 billion) rescue fund and rebuffed calls for joint euro borrowing to end the debt crisis, saying greater economic integration was needed first.
The leaders of Europe’s two biggest economies agreed to press for closer euro-area cooperation, tougher deficit rules and a harmonization of their corporate tax rates. A plan to resubmit a financial-transaction tax, which the European Union rejected in 2010, sent stocks lower in New York trading.
The economic data from the US on Tuesday were mixed, with housing continuing to show weakness. From MarketWatch:
Housing starts slipped 1.5% in July, according to data released Tuesday that highlight the lack of demand for new homes.
Starts fell to a seasonally adjusted annual rate of 604,000, down from a downwardly revised 613,000 rate in June, the Commerce Department said.
However, industrial production grew strongly. Again from MarketWatch:
The output of the nation’s factories, mines and utilities surged 0.9% in July as auto assemblies rebounded and consumers turned on their air conditioners, the Federal Reserve said Tuesday...
Adding to the positive sense from the report, output in June was revised up to a 0.4% gain from the prior estimate of a 0.2% gain and output in May was also revised higher...
Capacity utilization — a gauge of slack in the economy — rose to 77.5% in July from 76.9% in June. This is the highest level of capacity utilization since August 2008.
Along with the reported rise in capacity utilisation, Tuesday also brought news that US import prices rose in July, suggesting that inflation pressures remain. From Bloomberg:
Prices of goods imported into the U.S. rose in July, led by gains in costs of fuel, industrial supplies and clothing.
The 0.3 percent gain in the import-price index followed a revised 0.6 percent drop in June, Labor Department figures showed today in Washington. Economists projected a 0.1 percent decrease for July, according to the median estimate in a Bloomberg News survey. Prices excluding petroleum rose 0.2 percent...
Compared with a year earlier, import prices rose 14 percent, today’s report showed. That was the largest 12-month increase since the 18.1 percent gain in the period from August 2007 to August 2008.
Inflation has been an even bigger concern in the UK. Reuters reports the latest numbers:
Inflation ticked up last month and appears on track to hit 5 percent later this year, further squeezing cash-strapped Britons and posing a major obstacle to any moves by the Bank of England to give the economy an extra boost.
Consumer price inflation rose to 4.4 percent from 4.2 percent in June -- a slightly bigger increase than economists had predicted -- as banks raised fees and after retailers brought discounts forward to the previous month, the Office for National Statistics said.
Inflation did edge down in India in July though. AFP/CNA reports:
India's annual inflation edged lower to 9.22 percent in July, official data showed Tuesday, still far above the comfort level of the country's central bank, which has been raising rates aggressively.
Inflation, according to the benchmark wholesale price index, the nation's most-watched cost-of-living monitor, slipped to 9.22 percent in July from June's 9.44 percent, the commerce ministry reported.
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