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Nothing but bad news from Europe today in run up to November 12 summit
11/06/2012 3:30 pm EST
The composite EuroZone Purchasing Managers Index fell to 45.7 in October from 46.1 in September. That’s nine straight months of contraction. (In this survey anything less than 50 indicates that the economy is contracting.) That kind of drop in the index is consistent with a drop of 0.5% in fourth quarter GDP, according to Markit Economics.
The index in Germany fell to 47.7 in October from 49.2 in September. This increases the possibility of decline in German GDP in the fourth quarter.
In France the index actually climbed a bit. But the index was already in such terrible territory that the move up to 43.5 in October from 43.2 in September isn’t exactly good news.
In Spain and Italy the indexes fell again.
And that wasn’t the worst news for Spain. The European Union Commission cut its forecasts for Spanish GDP to a drop of 1.6% in 2012 and a decline of 1.5% in 2013. Spain, according to the commission, would return to growth with a 0.5% increase in GDP in 2014.
This forecast is considerably more pessimistic than projections from Spain’s own government, which predicts a 1.5% drop in GDP in 2012 and just a 0.5% decline in 2013. In 2014 the economy would grow by 1.2%.
If the commission’s forecasts are correct, then Spain’s current budget and deficit projections are wildly optimistic. The country would be on a clear path to violating its deficit target agreements with the EuroZone. And that would put considerable pressure on the government of Prime Minister Mariano Rajoy to actually make a formal request for a program of bond buying from the European Central Bank.
After considerable searching, I was able to find one piece of good news. U.K. retailer Marks & Spencer, which posted grim first-half results today, said that it has no intention of leaving the Greek market.
That news comes on Day One of two days of strikes and protests in Greece before tomorrow’s vote in parliament on the country’s newest austerity package.
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