The German Miracle
What has been called the “German miracle,” which is the ability for the European Union’s largest economy to grow in the face of the region’s recession, got some support today. The January 2013 Ifo Business Survey showed another bump up. Just yesterday, as a sign of the struggle of other EU nations, Spain revealed that its unemployment rate rose above 26%. And Markit data showed the economic activity in France, the area’s second largest economy by gross domestic product, had slowed. Ifo reports:
The Ifo Business Climate Index for German industry and trade rose for the third time in succession. Assessments of the current business situation were somewhat more positive after deteriorating last month. Future business perspectives improved considerably. The German economy made a promising start to the New Year.
Whether the German economy can maintain this pace probably depends more on its trade relationships with large nations outside the European Union — like the United States and China — than on those countries within Europe.
U.K. Gross Domestic Product
Just as U.K. Prime Minister David William Donald Cameron announced his future plans for his country’s membership in the European Union, there are signs that his austerity plans for Britain may not be working. U.K. gross domestic product contracted by 0.3% in the final quarter of 2012, which was worse than expected. Cameron’s future will be, in large part, determined by the direction of Britain’s economy. As of today, those prospects appear a little dimmer. According to the Office of National Statistics detailed data:
- GDP was estimated to have decreased by 0.3% in Q4 2012 compared with Q3 2012.
- Output of the production industries was estimated to have decreased by 1.8% in Q4 2012 compared with Q3 2012, following an increase of 0.7% between Q2 2012 and Q3 2012.
- Construction sector output was estimated to have increased by 0.3% in Q4 2012 compared with Q3 2012, following a decrease of 2.5% between Q2 2012 and Q3 2012.
- Output of the service industries was estimated to have been flat in Q4 2012 compared with Q3 2012, following an increase of 1.2% between Q2 2012 and Q3 2012.
- GDP was estimated to have been flat in Q4 2012, when compared with Q4 2011.
- GDP is estimated to have been flat between 2011 and 2012. Users are, however, reminded that this figure is subject to revision in the second estimate of GDP when all quarters of 2012 are open for revision.
Financial Job Losses
It was once a privilege, at least from a financial standpoint, to work on Wall St. The job cuts in the financial industry threaten the lucrative jobs of tens of thousands of people around the world who may no longer be able to afford expensive cars and real estate. According to Bloomberg:
Financial-services firms are on track to cut the most jobs in January since the start of 2009 as Europe struggles to emerge from the debt crisis and regulators impose tougher capital rules.
The 16,040 announced and expected reductions in the past three weeks are just short of the 16,389 cuts made in the industry during January 2009 after Lehman Brothers Holdings Inc. collapsed, according to data compiled by Bloomberg. Bankers and consultants expect the cuts to accelerate in coming months even as financial stocks gained 26 percent last year.
Douglas A. McIntyre