European Recession Deepens
The manufacturing sector of the eurozone could not be saved by the region's largest nation by gross domestic product - Germany. Research firm Markit reports that the balance of the region has moved into what statistics show is a deepening recession. The region's finance ministers and European Central Bank find themselves faced with the reality that nothing they have put in place to solve the recession problem has worked and they have to find another path. According to Markit:
At 47.9 in February, the Markit Eurozone PMI Composite Output Index came in above the earlier flash estimate of 47.3 but remained down on January's reading of 48.6.
The index therefore signalled a steepening of the downturn in business activity, contrasting with the easing trend which had been evident in the three months to January. However, the rate of decline remained less severe than seen in any of the nine months prior to January, and the average contraction seen over the first quarter so far has been the smallest since the first quarter of last year.
U.K. Dodges Recession
The United Kingdom, however, showed signs of dodging a recession, although one month of data hardly makes a trend. Markit reports:
Business activity in the UK service sector increased for a second consecutive month in February. New business also increased, leading to a further expansion of payrolls.
Confidence also continued to improve, with optimism regarding future activity at a nine-month high. However, rising input costs squeezed operating margins, as competitive pressures continued to restrain the pricing power of service providers.
The headline seasonally adjusted Business Activity Index posted 51.8 in February, slightly above January's 51.5 and a five-month high. Modest growth of activity has now been signalled for two successive months. More than 23% of respondents recorded increased activity since January, with anecdotal evidence suggesting stronger client demand led to the development of new projects and larger client bases.
There is no ready explanation for why the U.K. posted slightly positive results. Perhaps it is because the nation is less reliant on trade with other EU nations. Perhaps it is because, despite austerity moves, its consumer economy has recovered somewhat as the recession has gotten further from its deepest point.
China Lowers Expectations
China has set the goal for its economic growth very low compared to what it has been in the past decade - only 7.5% improvement in gross domestic product. The central government of the People's Republic also stated it wants to drive consumer spending. For years this has been at the core of U.S. GDP expansion. Among addition efforts, CNN Money reports:
Here are the government's stated goals for 2013:
- Gross domestic product growth of 7.5%.
- Consumer Price Index (CPI) target of 3.5%.
- A projected deficit of 1.2 trillion yuan ($190.48 billion), 400 billion more than last year and a total of 2% of GDP.
- Add more than 9 million urban jobs.
- Keep the registered urban unemployment rate at or below 4.6%.
- The government will work to ensure that real per capita income for urban and rural residents increases in step with economic growth.
- China will continue to implement a proactive fiscal policy. The government will give priority to education, medical and health care and social security.
- China will continue to implement a prudent monetary policy. The target for growth of the broad money supply (M2) is about 13%.
Filed under: 24/7 Wall St. Wire, Press Digest