After the optimistic version that everything is solved in the EU the economy of euro group shrank by 0.6% and EU 27 area was down by 0.5 % in the fourth quarter which was worse than forecast. Germany, France, UK, Portugal, Spain, Italy. All of them were down. The export data fell 1.8% in December and imports data fell by 3% in the same time. It is signaling not only weak domestic demand but also reflects wider slowdown in global economy. But politicians are still optimistic. German economy minister stated that “this weakness is only temporary. During the course of the year, the German economy will find its way back to growth. Current indicators, such as business surveys, confirm this.” So we should be optimistic as well. Once again we could play with the angle of statistical view. If we look at the industrial production on monthly basis we could be optimistic because it was up by 0.5 % in EU 27 and 0.7 % in EU 17. Optimism will disappear if we look at data from the YoY basis which showed us that industrial production shrank by 2.3 % in EU 27 and by 2.4% in EU 17.
Due to the downtrend of GDP France will miss its budget targets set for every member of euro club. France Finance Minister remained of course optimistic when he thinks that country will have 0.8 % GDP growth. But analysts predict stagnation or recession as more likely scenario. To fight against tax fraud France is going to implement prohibition cash transaction over € 1,000 by the end of 2013 with exemption for non-France fiscal residents who will be able to pay by cash up to €10,000 which is less as the current €15,000 limit.
Reflection of crisis is culturally inevitable. It is obvious that times are tough in Greece and this negative mood spread into the movies that premiered at the Berlin International Film Festival as well. And do not be surprised. Greek youth unemployment hit a new record when it crossed 60 %. It means that every 6th youngster between 15 and 24 is unemployed. And situation is worsening in Spain as well when youth unemployment hit a new record over 55%. Construction activity in Greece is in free fall when in total dropped 66.6 percent year-on-year in terms of building permits, 63.3 percent in terms of surface area and 65.4 percent in terms of volume.
According to a study by Ernst & Young revealed on Monday, banks in the 17-member eurozone have a record amount of bad loans. E&Y estimated that bad loans – meaning that they are currently not being paid back at all or could only partly be paid back – are worth of 918 billion euros or 7.6 percent of all loans granted in the eurozone. The record holder is Spain by 15.5 % of bad loans and Italy by 10.2 % contrary German lenders for their part only sit on 2.7 % of bad loans. If we assume that the Spain and Italy situation is much worse the Ernst & Young estimation could be consider as optimistic one concerning the possible future development in the euro zone.
Japan economic minister wants Nikkei index on 13,000 points by the end of March which is more than 17 % plan. What does it mean? What will happen in Japan to boost stock market? New tax declines, better business environment, new technology invention or some announced real investments? No. nothing of it was announced. Easing of monetary policy is the most probable answer inspired by the US.
We have good news from the USA. Their budget reached surplus of $2.9 bn. in January 2013. It was first time after 8 month. January’s budget benefited from extra revenue from higher Social Security taxes and this surplus helped lowered the deficit to $290.4 billion — nearly $60 billion lower than the same period a year ago. The only problem is that their yearly deficits have been for last 4 years more than $1 trillion per year. This year budget deficit is predicted on “just” $845 billion.
The total number of recipients on so called Food Stamp program was 47.7 million in November which means an increase of 141,000 on monthly basis. It also means that all time record 23,017,768 households are on foodstamps program cost $281.21 per month per household.
Matúš Pošvanc