How close is Eurozone to a new recession which may trigger formidable developments?

Opening of the photo exhibition entitled ‘I Am Not a Statistic’ organised at the European Parliament, with the participation of Johannes Hahn, Member of the European Commission at the rostrum. (European Commission Audiovisual Services, Date: 30/06/2015, Location: Brussels – European Parliament).

Opening of the photo exhibition entitled ‘I Am Not a Statistic’ organised at the European Parliament, with the participation of Johannes Hahn, Member of the European Commission at the rostrum. (European Commission Audiovisual Services, Date: 30/06/2015, Location: Brussels – European Parliament).

According to the latest statistics published in August by Eurostat, the EU statistical service, the euro area economy grew by a meager 0.3% during the second quarter of this year. Despite the fact that the mere three decimal points of more gross product typically illustrate a positive development for the Eurozone economy, there are other statistical indicators which point to the negative direction. Before presenting those alarming data it’s worthwhile to theorize a bit about the other statistics.

This newspaper has been following closely the languishing growth path of the euro area economy. In this task Eurostat is the main source of credible statistics with the quarterly estimates of GDP. In addition, alongside the gross domestic product data, EU’s statistical service produces more facts concerning equally important variables related to Eurozone’s economic developments. The most pertinent of them are the monthly retail trade sales and industrial production estimates.

Crucial indicators

There are more variables though related to the overall prospects of the single euro money area economy. Some of them are probably even more important than the GDP evolution statistics themselves. In this line of thinking there is, firstly, the monthly inflation rate statistical series. Actually, in the present languishing economic conjuncture with the danger of disinflation or even deflation hanging around, the consumer price indexes acquire special importance.

The same is true for the unemployment rate. Needless to point out that from the policy point of view, the overall performance of any economy is authentically depicted by the unemployment rate. After all, economies exist for the people to be able to find employment and get along with their lives. Under this light, in relation to the political developments and the government decision making, the monthly unemployment estimates published by Eurostat are more important than any other statistical indicator.

Theory and practice

Now armed with this little theory it’s easier to embark into the sea of statistics. As mentioned above, Eurozone’s DGP grew by three decimal points in the second quarter. Unfortunately, every other indicator points to the negative direction. Starting from the retail trade, Eurostat found that in June the sales fell by 0.6% in relation to May. It’s worth noting that the movements of the retail sales index are a safe estimate of consumption which is the largest component of GDP. On top of that, a drop in retail sales today may be a forewarning for a fall in investment in the immediate future. Knowing that consumption and investments account for the bulk of GDP, it won’t be a wild estimate if one predicted a negative effect on growth in the immediate future.

Let’s pass now to the nuts and bolts of the real economy, the industry; according to Eurostat, industrial production fell by 0.4% in June compared to May. It’s not only that though. In June also industrial producer prices fell in comparison to May. When producers are forced to cut down their prices it’s quite possible that in the next month they might cut down their production too. Unfortunately, all along this year industrial production and industrial producer prices oscillate around zero and during most months they are found to be below the zero line.

The deflation danger still lurking

Regarding now the overall inflation rate, Eurostat published this week its flash estimate for the August figure at 0.2%. Right from the beginning of the year inflation is stuck around zero and in March it actually fell below it. This threatening performance of consumer prices has prompted the European Central bank to introduce its latest extraordinary monetary policy measure of €1.14 trillion, to be printed and spent for free money injections to the economy. Under this scheme, the ECB will be spending at least €60 billion a month until September 2016 in the government debt markets, buying sovereign bonds issued by member states and European institutions.

Last but not least, the Eurozone unemployment rate has steadily remained in the double digit area for many years now, since the 2007-2008 financial Armageddon. Eurostat found it at 10.9% in July. It was stuck at 11.1% for three consecutive months till June. In the euro area all along the last seven years the number of people without a job ranged from 17 to 18.5 million people. This is practically the same as if a major Eurozone country is staying practically totally idle.

What hurts more

All in all, the crucial statistical indicators betray long term stagnation at the limits of recession for the Eurozone economy. As it turns out, the only EU institution that worries about it is the ECB. Berlin has opposed and probably fatally delayed the application of the central bank’s extraordinary measures and Germany, regrettably, seems happy with the present situation. It still insists that the European economy doesn’t need a change of economic policy course. If this ‘arrangement’ continues in the future it is most likely that some countries will face insurmountable economic and political problems.

First of all, Greece may fail to implement the third bailout agreement Athens signed with Brussels and this may trigger quite unpleasant economic and political developments. Add to that the recent fall out in the stock exchanges and the mix may become explosive.

 

the sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

These social entrepreneurs are lighting up Africa

More than half of world’s refugee children ‘do not get an education’, warns UNHCR

How responsible businesses can step forward to fight coronavirus

“Sorry mom it’s not our day”: the true refugee story of a young doctor and his family forced to flee their home

Here’s how to find a job you really love

UN agency plan tackles ‘hidden cost’ of gold, paves way for safer, mercury-free mining

Love Affair with Some(one)/(thing)

Civil society groups matter for Cambodia’s sustainable development: UN expert

To what extent are our moral standards responsible for killing people?

Smokers who quit one month before surgery reap benefits: UN health agency

Here’s how we reboot digital trade for the 21st century

The West cannot ignore Russia; dazed Germany sitting on the fence

“France will be there, it will always be there!”, French President Hollande says in a rather disorganised speech; the Sting reports live from World Economic Forum 2015 in Davos

Direction Wakanda: finance methods to make Africa a superhero continent

Venezuela: Parliament recognises Guaidó, urges EU to follow suit

Team Europe increased Official Development Assistance to €66.8 billion as the world’s leading donor in 2020

We need to rethink neuroscience. And you can help us

Four in 10 indigenous languages at risk of disappearing, warn UN human rights experts

Congrats to the #FutureofMalta: a new age of voting

Eurozone: Avoiding a new Greek accident

Venezuelan exodus to Ecuador reaches record levels: UN refugee agency steps up aid

Here are 10 of Nelson Mandela’s most inspirational quotes

Civilians ‘must never be a target,’ says UN in Afghanistan, amid troubling number of casualties during Ramadan

China will be the world’s top tourist destination by 2030

More than 90 per cent of Africa migrants would make perilous Europe journey again, despite the risks

Eurozone: Austerity brings new political tremors

Sahel States need international support ‘now more than ever’– UN peacekeeping chief

What universities can learn about citizenship in the COVID-19 pandemic

UN, African Union make significant joint commitment to global health

MEPs hail minimum global corporate tax rate deal as historic

The Future of Retail: Changing shopping patterns will mean retailers need to invest in costly and complex solutions

On technology and medical ethics

Why the future for cars is connected

5 myths about face masks under the microscope

Medical students against male supremacy

Mali: Two peacekeepers dead after dawn attack, several injured – UN Mission

A Sting Exclusive: “Sustainable development goals: what role for business?” Commissioner Mimica asks live from European Business Summit 2015

Medical ethics in the age of the social media influencers

Empowering people living with HIV ‘will end the epidemic’, says AIDS agency chief

5 things we get wrong about young people, according to a US study

Europe votes against GMOs but the Council votes for TTIP

Five ways individuals can help save the oceans

Scientists have a new suggestion to create more climate-friendly cows

IMF: When high yield goes boom

It’s time to build a responsible media supply chain

Europe eyes to replace US as China’s prime foreign partner

Myanmar: Departing UN rights expert still hopeful for democratic transition

European Labour Authority ready to start working in October as decision is taken on new seat

‘The best-selling brand today is fear’: UN chief highlights urgent need to address global ‘deficit of trust’

FROM THE FIELD: Going the extra mile with vaccines

EU-US Privacy Shield data exchange deal: US must comply by 1 September, say MEPs

These are the UK’s biggest trading partners

How technology can help us achieve universal healthcare

Conflict of interest and misuse of EU funds: The case of Czech PM Babiš

Towards a stronger and more resilient Schengen area

4 principles for securing the digital identity ecosystem

7 ways business can be agents for peace

EU budget 2022: Speeding up Europe’s recovery and progressing towards a green, digital and resilient future

SDGs and the historical and economic impact on Brazilian health

Rich economies not a promise of education equality, new report finds

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s