EMU Economic Data is Questionable
ECB President Trichet noted last week that Q2 growth was stronger than expected and that Q3 was off to a good start. This may be a premature judgment and based with the Q3 assessment based almost exclusively on survey data. Today’s news confirms that the euro zone industrial recovery faltered in late Q2. The consensus had expected a 0.6% rise in June industrial output and instead a 0.1% decline was reported. That May’s advance was revised up slightly (1.1% from 0.9%) does not change the underlying picture. This is not meant to exaggerate the small decline after a large increase, but rather to highlight the negative news stream. Tomorrow Q2 GDP for the euro zone will be reported. The consensus calls for a 0.7% increase after a 0.2% expansion in Q1. The risk seems to be on the downside after today’s industrial production data. Greece, whose economy is 2-3% of the euro zone economy, reported today that Q2 GDP contracted 1.5% after a 0.8% decline in Q1 that was revised from -1.0%. The consensus had been for a 1.1% decline. Elsewhere, Irish banking woes continue to be discussed and flagged in the media and today there is also reports playing up that some local governments in Spain continue to be frozen out of the capital markets. There is also a report in the local German press warning of the costs of bailing out the German banking sector.
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