In recent times business headlines have been dominated by distress, chaos, and disaster. Terms such as ‘Eurozone debt crisis’, ‘Financial Meltdown’, and ‘Global Financial Crisis Two’ – yes we are currently playing out the sequel to an earlier crises – have become commonplace: ten a penny: staple expressions to describe the current economic climate.
“After experiencing two consecutive periods of contraction the UK economy is now in a double-dip recession” – this statement sounds more like a yoga class for pregnant women than a description of our country’s finances, but sadly this is where we stand.
UK GDP shrank by 0.2% in the first 3 months of 2012 due to a sharp decline in Construction Output, as orders from the Eurozone slowed down. This is bad news, but it could be a lot worse; PMI reports for Manufacturing, Services, and Construction have picked up significantly over the past couple of weeks and the Unemployment Rate has dropped. Many economic commentators – perhaps the same analysts who predicted a 0.1% growth in the first quarter – have questioned the accuracy of the negative result and are firmly of the belief that an upward revision will be made at a later date.
However, in the rest of the world (read the Eurozone) the bad news has not been accompanied with any such consolations.
- The French Presidential Election threatens to unsettle the European hierarchy, and could destabilise the fiscal compact.
- Australian Producer Inflation fell from 2.9% to 1.4% which combined with a fall in Consumer Price Inflation from 3.1% to 1.6% has raised the fears of an interest rate cut from the RBA.
- The Eurozone Government Debt-GDP Ratio increased from 85.3% to 87.2% as toxic austerity measures cause the debt pile to grow.
- The Eurozone PMI figures all shrunk further away from the 50.0 level that marks expansion from contraction.
- Italian and French Business Confidence surveys both showed a decline in investor outlook, which is worrying as these surveys have proven to be extremely accurate historically.
- Canadian Retail Sales fell by 0.2%.
- The US FOMC Press Conference saw Ben Bernanke describe the persistent issues that are weighing upon the US economy.
- Eurozone Business, Consumer, Economic, Industrial, and Services Confidence all fell.
- German and French Consumer Spending both posted declines.
- US annualised GDP shrunk from 2.5% to 2.2%.
- The Dutch government split up over austerity measure arguments, as did the Romanian parliament.
- Spain had its credit rating cut by Standard & Poor’s from A to BBB+.
- Spanish Retail Sales fell by 3.7%.
- Spanish Unemployment jumped up to 24.4%, and their 10-year government bond yields breached the 6.0% mark again.
- And last but not least Cristiano Ronaldo and Lionel Messi both missed penalties as Real Madrid and Barcelona were knocked out of the Champions League by Bayern Munich and Chelsea. In a torrid week for Spain, even the prospect of an El Clasico all Spanish final has eluded them.