Just last month, the eurozone reported second quarter GDP growth of 0.3%. This was just enough to drive the bloc out of its lingering recession. Germany's economy, which grew by 0.7% between April and June drove the recovery. But now, the positive momentum is slowing.
Germany’s seasonally adjusted exports fell by 1.1% in July from June. This is a far cry from the widely anticipated rise of 0.7%. Notably, Germany's exports to the eurozone nations, which account for approximately a third of its exports, fell by 0.7%, compared with the same month last year. This leaves us questioning the ability of Germany, which has been the self proclaimed locomotive in driving the eurozone’s economic recovery, to maintain enough steam to continue to power the train.
The labor market in the eurozone continues to be fragile, with joblessness still close to record highs.
Meanwhile, Germany’s Labor Office data showed that seasonally adjusted joblessness increased by 7,000 to 2.943 million in August, the first month-on-month increase since May. Time will tell if this is a trend or if its just a more typical delay in hiring, as hiring managers ofter pause several months after positive news before adding new jobs. The autumn hiring season will be closely watched and quite telling.
German's economy only narrowly avoided recession at the start of the year saved by a strong second quarter growth and still acceptable unemployment, but this now under a level of pressure.
Spain and Portugal, remain under stress, although unemployment in these countries have improved ever so slightly. Yet cracks remain. Spanish factories reported another month of falling production. Figures for July show that factories and utilities cut production at an annual rate of 1.4%, which is the 23rd month of falling industrial production. Italy is still under significant pressure, while the Netherlands is seeing increasing evidence of a sustained slowdown.
Given the above, the eurozone's ability to continue to find growth is increasingly uncertain. Germany sneezes, well we know the rest. The eurozone needs a dose of vitamins to avoid a relapse.
Steve Picarillo is an internationally known financial executive, analyst and author. Steve has spent most of his career on “Wall Street” as a lead analyst covering global financial institutions. Mr. Picarillo is currently using his vast knowledge of business, corporate finance, operations and communications as a consultant to large financial institutions, retailers and small to mid-sized business. In addition to being a expert on global banking, Steve is a branding expert, a student of the global economic environment, and a motivational speaker.
Steve publishes several blogs with topics that include discussions on the economic environment and operating a business in this still uncertain economic environment. These newsletters will be distributed on a “ by request only” basis. To receive Steve’s blogs and articles, contact steve@creativeadvisorygroup.com with OPT IN as subject.
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