As mass strikes took hold and then turned violent across southern Europe in a co-ordinated protest against austerity, it was yet another rough night of macro data from the continent.
EMU industrial production data was down 2.5% m/m and 2.3% y/y in September. Although it must be noted this data isn’t seasonally adjusted the downturn appears broad and is inline with recent PMI data. Germany fell 2.1%, France 2.7% and Portugal and Ireland showed falls greater than 12%. Slovakia and Estonia managed some small gains.
Heading into Q4 it looks like there are significant headwinds for growth and recession looks to be beckoning for even the strongest economies. Portuguese Q3 GDP came out last night and was down -0.8% q/q, -3.4% m/m highlighting that the country is certainly going to struggle to meet even its newest targets , and that’s before the flow-on effects of the last round of fiscal tightening take hold.
We get German Q3 GDP tonight, the expectation is for 0.2% growth in the quarter, but given the latest round of weak data I wouldn’t be surprised to see a lower number. Overnight the German audit office has released a report on government waste which is likely to ratchet up the rhetoric on fiscal tightening in Germany in the lead up to the election. Although this is prudent it is the opposite of what needs to occur in terms of re-balanceing the euro-system at this time.
And speaking of that balance, or lack of it, Greece’s flash GDP was awful:
Greece’s economy contracted by 7.2 percent of gross domestic product in the third quarter of this year, according to data published by the Hellenic Statistical Authority (ELSTAT) on Wednesday.
“Available non-seasonally-adjusted data indicate that, in the third quarter of 2012, the Gross Domestic Product (GDP) at constant prices of year 2005 decreased by 7.2% in comparison with the third quarter of 2011,” ELSTAT said.
This represents the deepest contraction so far this year, as the economy shrank by 6.7 percent in the first quarter and 6.3 percent in the second, according to revised figures presented by ELSTAT
So there is doubt already that the latest figures used by the Greek government in their economic estimates will hold and you have to wonder how the IMF is going to take such news given there are already very public displays of displeasure about the sustainability of the Greek program and obvious political tensions over the next step. The politicking and argy-bargy continues as I type.
ELSTAT also revised down previous estimates on growth in 2010 and 2011 which suggests, once again , that fiscal multipliers used in previous estimates have been woefully incorrect.
While the focus is on Greece, let’s not forget it’s little economic sister, Cyprus, where discussions with the Troika are on-going. Cyprus’s exposure to the Greece means that its banking system is already in serious trouble, unemployment is over 10% and rising, GDP is falling fast and it’s real estate market has shades of Spain. It’s economy is small at just 0.15% of Europe’s GDP,but it’s exposure to Russia makes its economic trouble politically sensitive. I suspect Cyprus will be a developing story over 2013 and something to watch closely.
Full Greek GDP report below.