Euro Zone Private Sector Standstill; Italy Lowers Outlook

Devan Biswas
22 Sep, 2011
New York City

The euro zone private growth declined in September with the grim outlook for the rest of the year. Italy lowered its growth views till 2013. Spain home loans fell to a record low in eight years but tourist arrivals surged in August.

[R]4:50 PM Frankfurt – The euro zone private growth declined in September with the grim outlook for the rest of the year. Italy lowered its growth views till 2013. Spain home loans fell to a record low in eight years but tourist arrivals surged in August.[/R]

The euro zone private sector continued its slide in growth in September and the outlook for the last month is weaker than the third quarter.

The banks were among the leading decliners after the European risk monitoring agency warned of rising risks to the financial systems in the euro zone and urged all authorities to take swift actions.

The Euro zone private sector registered first contraction in July 2009 according to the latest survey of purchasing managers by Markit Economics.

The preliminary estimate showed the index declined to 49.2 from 50.7 in August and the reading below 50 indicates shrinkage. The survey showed the decline in manufacturing and in services.

The index of services decreased to 49.1 from 51.5 in August and for manufacturing dropped to 48.4 from 49 in the month.

The two leading economies in the region, Germany and France showed weakening economic activities. German private sector growth declined for the eight month in a row and index was nearly at standstill at 50.8 from 51.3 in August.

French composite index for the private sector in the month declined to 50.7 from 53.7 in August.

European Bank Risks Rise

The European Systemic Risk Board today urged concrete and swift action from bureaucrats and politicians to stem the “considerable” increase in threats to financial system and banks.

The ESRB, risk watch dog said that funding vulnerabilities within the European Union banking sector and weakening growth outlook need a decisive action from all authorities.

Italy Lowered Economic Outlook

Italian government lowered its economic outlook for the nation. The cabinet lowered its forecast for 2010 gross domestic product to 0.6% increase from the earlier 1.1% rise estimate.

Growth outlook for 2012 was lowered to 0.6% from 1.3% and for 2013 to 0.9% from 1.5% in the previous estimate.

The government budget deficit is estimated to fall to 3.9% in 2011, 1.6% in 2012 and 0.1% in 2013.

Italy recently released austerity measures to bring its budget in balance by 2013 and is likely to announce additional 9 billion euros of cuts as early as this month.

Spanish Housing Market Slum Deepens

The mortgage approvals and the amount of housing loans issued by Spanish banks dropped to the lowest since record keeping began in 2003.

The data released by the government agency INE showed mortgage approved in July dropped 44.2% to 46,980 and the value of mortgage approved plunged 48.3% to 5.8 billion euros.

However, foreign tourist arrivals in August rose 9.4% to 7.6 million, the highest since July 2007 according to the data released by the Industry Ministry survey.