Europe Returns to Recession
Europe has dropped into recession or nearly so. Eurostat reported that third-quarter gross domestic product in the euro-area fell 0.1%, compared with the second quarter. Among the EU27, GDP registered a 0.1% improvement. In the second quarter, both regions had negative GDP of 0.2%. The drag was from the countries that would be expected — Portugal (-1.1%), Spain (-0.3%) and Italy (-0.2%). The news will not affect bailout plans. There is nothing in the report that was not expected. Eurostat contrasted the GDP of the region with that Japan and the United States, but with the drop in Europe that contrast may be much less in the fourth quarter.
During the third quarter of 2012, GDP increased by 0.5% in the United States, compared with the previous quarter (after +0.3% in the second quarter of 2012) and fell by 0.9% in Japan (after +0.1%). Compared with the same quarter of the previous year, GDP rose by 2.3% in the United States (after +2.1% in the previous quarter) and by 0.2% in Japan (after +3.4%).
Tech Company Layoffs
Two old tech companies, both in trouble, announced layoffs. The actions might be attributed to a bad economy or the fiscal cliff. But that would be a mistake. Texas Instruments Inc. (NASDAQ: TXN) and Xerox Corp. (NYSE: XRX) are in declines they cannot reverse. TI has little share of the hot mobile chip market. Xerox is in the ancient business of printers and in low-end tech consulting. Each has been passed by more advanced companies. Xerox cut 2,500 jobs and TI 1,700. Xerox CEO Ursula Burns said, “We’ll be able to have a low-growth business shifting to a high-growth business as we get more of our revenue from services. On balance, we’re making progress, not fast enough. I’m not patient.” Neither are the people who lost their jobs.
BP’s Deal with the Justice Department
The Wall Street Journal and Reuters have published accounts of a settlement between the Justice Department and BP PLC (NYSE: BP) over the Deepwater Horizon catastrophe. BP has already spent tens of billions of dollars for clean-up costs and settlements with businesses and people harmed by the leak. The U.K.-based company also has sold off assets to gird its balance sheet against suits by the United States. Reuters reports:
The deal could resolve a significant share of the liability that BP faces after the explosion killed 11 workers and fouled the shorelines of four Gulf Coast states in the worst offshore spill in U.S. history. BP, which saw its market value plummet and replaced its CEO in the aftermath of the spill, still faces economic and environmental damage claims sought by U.S. Gulf Coast states and other private plaintiffs.
Douglas A. McIntyre