Euro zone GDP decline worst since Q1 2009

Updated 15 February 2013
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Euro zone GDP decline worst since Q1 2009

BRUSSELS: The euro zone slipped deeper than expected into recession in the last three months of 2012 after its largest economies, Germany and France, shrank at the end of a wretched year for the region.
It marked the currency bloc’s first full year in which no quarter produced growth, extending back to 1995. For the year as a whole, gross domestic product (GDP) fell by 0.5 percent
Economic output in the 17-country region fell by 0.6 percent in the fourth quarter, EU statistics office Eurostat said, following a 0.1 percent output drop in the third.
The quarter-on-quarter drop was the steepest since the first quarter of 2009 and more severe than the average forecast of a 0.4 percent drop in a Reuters poll of 61 economists.
Within the zone, only Estonia and Slovakia grew in the last quarter of the year, although there are no figures available yet for Ireland, Greece, Luxembourg, Malta and Slovenia.
The big economies set the tone.
Germany contracted by 0.6 percent on the quarter, official data showed, marking its worst performance since the global financial crisis was raging in 2009.
France’s 0.3 percent fall was also slightly worse than expectations.
Worryingly for Berlin, it was export performance — the motor of its economy — that did most of the damage, declining significantly more than imports, although economists expect it to bounce back quickly.
The euro hit a session low against the dollar after the weaker than forecast German reading and dropped again after the release of full euro zone figures.
Back revisions to the French figures showed its output fell by 0.1 percent in each of the first and second quarters of 2012, meaning the country has already experienced one bout of recession in the last twelve months.
While the European Central Bank’s pledge to do whatever it takes to save the euro has taken the heat out of the bloc’s debt crisis, even its stronger members are gripped by an economic malaise that could push debt-cutting drives off track.
French Prime Minister Jean-Marc Ayrault acknowledged for the first time on Wednesday that weak growth was putting his government’s deficit goal for 2013 out of reach.
Resilient Germany is expected to rebound and the bloc as a whole is expected to have improved in the first quarter, as suggested by a pick-up of factory orders in December, but it is not yet clear if growth has returned.
Nick Kounis, economist at ABN AMRO, said the decline of fears the euro could break apart and cheap credit had sown the seeds for the recovery.
“However, ongoing severe budget cuts, rising unemployment, bank deleveraging all point to the recovery being excruciatingly slow,” he said, adding the strong euro was also a threat.
The ECB has a wide-ranging projection for euro zone GDP growth in 2013 of between -0.9 and +0.3 percent. ECB Vice President Vitor Constancio said on Tuesday he expected no major change to the forecasts in March.
Dutch GDP dropped 0.2 percent over the quarter, keeping it in recession, and the Austrian economy shrank at the same rate.
For the more embattled members of the currency bloc, matters are worse. The greatest reported decline was in bailed-out Portugal, down 1.8 percent.
Italy suffered its sixth successive quarterly fall in GDP — this time by a sharp 0.9 percent — putting it into a longer slump than it suffered in 2008/2009.
Its recession has been deepened by austerity measures that outgoing Prime Minister Mario Monti introduced to stave off a debt crisis.
With an election due on Feb. 24/25, all sides in a three-way race between Monti’s centrist bloc, Pier Luigi Bersani’s center-left coalition and Silvio Berlusconi’s center-right are pledging to cut taxes to try to kickstart economic growth.
Spain, the euro zone’s fourth largest economy, released figures two weeks ago which showed it remained deep in recession after a 0.7 percent contraction in the fourth quarter.
Madrid is also pressing on with austerity measures to cut its debt but may be given more time to meet its deficit targets by the European Commission if its economy worsens further.
There are signs that countries like Spain are starting to benefit from internal devaluations — marked by wage falls and job losses aimed at making companies leaner and more productive.
The ECB predicts the euro zone will pick up later in the year although its currency, if it keeps strengthening, could quickly snuff out any of those hard-won competitive advantages for its high debt members.
More recent data for January have already suggested some upturn in the first months of 2013, in the bloc’s stronger members at least, and if improvement comes it is expected to be seen in Germany first.


Oil prices rise on Iran sanctions worries, decline in Venezuelan output

Updated 30 min 12 sec ago
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Oil prices rise on Iran sanctions worries, decline in Venezuelan output

SINGAPORE: Oil prices rose on Thursday, supported by expectations the United States will re-impose sanctions against Iran, a decline in output in Venezuela and ongoing strong demand.
Brent crude oil futures were at 74.27 per barrel at 0643 GMT, up 27 cents, or 0.4 percent, from their last close.
US West Texas Intermediate (WTI) crude futures were up 14 cents, or 0.2 percent, at $68.19 per barrel.
Traders said markets climbed on expectations that the United States will in May re-impose sanctions against Iran, a major oil producer and member of the Organization of the Petroleum Exporting Countries (OPEC).
French President Emmanuel Macron said on Wednesday that he expected US President Donald Trump to pull out of a deal with Iran reached in 2015, in which Iran suspended its nuclear program in return for western powers lifting crippling sanctions.
Trump will decide by May 12 whether to restore US sanctions on Tehran, which would likely result in a reduction of its oil exports.
Further pushing oil prices has been declining output in Venezuela, OPEC’s biggest producer in Latin America.
Venezuela’s crude production has fallen from almost 2.5 million barrels per day (bpd) in early 2016 to around 1.5 million bpd due to political and economic turmoil.
US oil major Chevron Corp. has evacuated executives from Venezuela after two of its workers were imprisoned over a contract dispute with state-owned oil company PDVSA.
Venezuela’s plunging output and looming US sanctions against Iran come against a backdrop of strong demand, especially in Asia, the world’s biggest oil consuming region.
However, not all market indicators point toward tighter supplies.
US crude oil inventories rose by 2.2 million barrels in the week to April 20, to 429.74 million barrels. That’s almost 10 million barrels above the five-year average.
US crude production climbed by 46,000 barrels per day (bpd) on the previous week, to 10.59 bpd. That’s an increase of more than a quarter since mid-2016.
American crude oil output has overtaken that of top exporter Saudi Arabia. Only Russia currently produces more, at around 11 million bpd.
The soaring US output has made WTI crude around $6 per barrel cheaper than Brent, the international benchmark for oil prices.
Dutch bank ING said “the wide discount for WTI to Brent saw exports rising 582,000 bpd week-on-week to a record high of 2.33 million bpd.”
With US output and exports surging, some analysts warn that the 20-percent climb in Brent prices since February is starting to look overdone.
“The market does look a little toppish,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.