Drop In Business Activity Forecasts Recession For Europe In Third Quarter

Wednesday, October 03, 2012 06:53
Drop In Business Activity Forecasts Recession For Europe In Third Quarter

Tags: European crisis | European zone | world economy

Europe’s economy is projected to fall into recession during the third quarter based on the drop in business activity.

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September’s Purchasing Manager’s Index for the Eurozone fell from 46.3 in August to 46.1. Combined with the reports from July and August, the September report shows the poorest results since the second quarter of 2009.
Orders in September fell at the sharpest rate since June of 2009, indicating little chance that Europe will be able to pull off a recovery during the fourth quarter.
Retail spending in Europe is a bright spot with retail sales rising .1% in July. That’s the third consecutive month of increase after a .9% spike in May.
This, at least, indicates the economy is not collapsing. Europe’s economic situation weighs heavily on world markets and European Central Bank (ECB) president Mario Draghi has taken unprecedented steps to restore confidence.
His ability to work around Germany’s dissention toward making open-ended bond purchases designed to keep borrowing costs low for distressed Eurozone countries was nothing short of masterful.
He in essence defied Europe’s biggest shareholder, Germany, who has long resisted printing money to save distressed economies. With the survival of the euro at stake, Draghi was able to convince the Bundesbank that there was no other option.
Germany’s is the strongest European economy and its support is essential to the success of the euro.
European financial leaders are struggling with the details of the bond-buying program as well as the central oversight mechanism for banks. A looming recession may inspire a greater willingness toward implementation.


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