Look Out for These Signs of Vitality from the EU Economy
Two separate reports indicate signs that the Eurozone is turning around and moving towards the beginnings of a recovery, MarketWatch reports. Retail sales in the countries of the European Union rose by 0.1 percent in July of 2013 as compared to the previous month. While they still remain 1.3 percent lower than their values at the corresponding times in 2012, the positive direction of motion is a good sign for the future economic progress of the EU’s member countries.
Additionally, GDP increased by 0.3 percent from the first quarter to the second quarter of 2013. Like the retail sales data, the numbers are still lower than those from the spring months of 2012, but the rise in GDP exceeds most expectations and is welcome news to those who are looking for signs of vitality within the numbers.
The increasing number of positive signs regarding the European economy — including the forecasting of improved growth and high confidence levels as well as the two statistics published today– will begin to put pressure on Mario Draghi and the European Central Bank as market interest rates see the opportunity to rise. Despite this, Draghi says that he is committed to keeping official interest rates firmly at or below their current level of 0.5 percent, something the ECB is sure to discuss in its meeting tomorrow.
Eurostat, the statistics division of the European Union, actually released two separate reports detailing their findings. The first, which proclaimed the rise in retail sales, found that the gains were fueled by a rise in the food, tobacco, and beverage sectors, with other sectors actually witnessing a slight decline.
While this does have the positive impact of stimulating businesses in those areas, it does raise the question of whether such gains are actually sustainable, especially since goods such as tobacco and alcohol have little lasting value after consumption.
The second report, which focused on GDP growth, quelled some fears by showing a degree of across the board uniformity — with the only big loser in the second quarter being Cyprus. Portugal surprisingly topped the charts with a change in GDP growth of over 1.1 percent in the positive direction. Also analyzed were data on imports and exports, with both rising approximately 1.5 percent in the second quarter of 2013. This is an important indicator because it represents independent, international business dealings within the Eurozone.
A final number that was on the rise in the second quarter of 2013 in Europe was government spending, which increased by 0.4 percent. This could be indicative of the tapering off of austerity measures if it can be shown to be part of a trend across multiple quarters rather than just a fluke.
However, in order to maintain such an increase, the member countries of the European Union will need to find sources of cash, which is by no means an easy proposition in the economic climate of today’s Eurozone. As many have cautioned, more time will be needed to see whether positive economic indicators are truly indicative of a recovery in Europe.