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Italy’s record recession – early reaction
The euro jumped at 10am BST, on the news that the Italian economy shrank by less than feared in Q2.
And here’s some early comment via twitter, from the BBC’s Gavin Hewitt and political analyst Alberto Nardelli:
Italy: GDP shrinks for 8th quarter but decline less severe than previous Q. Won't really know until Oct whether euroZ crisis easing.
— Gavin Hewitt (@BBCGavinHewitt) August 6, 2013
One bright spot in #Italy's GDP figures – pace of contraction appears to be slowing.
— Alberto Nardelli (@AlbertoNardelli) August 6, 2013
Updated
Table: Italian GDP
Italy’s economy has suffered some sharp falls in output since the recession began in the summer of 2011.The 0.2% decline in GDP between April in June is the second smallest quarterly decline over the last two years, as this table of GDP on a quarterly basis shows:
That’s from ISTAT’s press release (pdf).
Reuters: It’s better than analysts expected
Here’s Reuters early take on the news that Italy’s recession has now lasted for two full years:
Italy’s economy shrank by less than expected in the second quarter, adding to recent signs that the country’s longest post war recession is bottoming out but marking the eighth consecutive quarter of contraction.
Gross domestic product fell 0.2% following a 0.6% in the first three months, and dropped 2.0% on an annual basis, national statistics bureau ISTAT reported on Tuesday.
A Reuters survey of analysts had pointed to a second quarter fall of 0.4%, down 2.2% annually.
ISTAT gave no numerical breakdown of GDP components with its preliminary estimate, saying only that activity had contracted in all the main sectors of activity: industry, services and agriculture.It said so called “acquired growth” at the end of the second quarter stood at -1.7 percent.
This means that if GDP posts a flat quarterly reading in the final two quarters of 2013, over the whole year it will be down 1.7 percent from the previous year.
The International Monetary Fund has predicted that Italian GDP would shrink by 1.8% during 2013. The important question, though, is whether it bounces back in 2014. If today’s 0.2% decline means the recession is bottoming out, next year could be a little brighter…
Updated
Italian recession sets new record
BREAKING: The Italian recession has set a new record, but the downturn has eased in the last three months.
ISTAT, the Italian statistics body, reported that GDP fell by 0.2% in the second quarter of 2013. That’s better than the 0.6% decline which Italy suffered in the first three months of 2013.
This means that the Italian economy has shrunk for eight straight quarters, the longest contraction since records began in 1970.
Italian GDP is 2.0% lower than a year ago, showing the pain suffered by the country in the last year.
Details and reaction to follow
Updated
Victoria Clarke of Investec says this morning’s rise in UK industrial output shows that the recovery may be more ‘broad-based’ than we thought.
She explained (via Reuters):
The PMIs in the manufacturing sector have been in expansionary territory since April and what we’re seeing today is that that is now coming through to official measures of production which is good news and points towards the UK’s recovery being a bit more broad-based – certainly moving away from a recovery that looked to be more services-dominated than anything else.
For the Q2 GDP figures it looks as if there’s no headline revision so this is more interesting in terms of what it means for broader UK recovery momentum than anything else.
Bumper UK industrial production data
Britain’s industrial sector posted much stronger growth than expected in June, in the latest sign that the UK economic recovery is gathering pace.
Data just released by the Office for National Statistics showed that industrial production rose by 1.1% during June alone, beating forecasts of a 0.6% rise. Manufacturing posted a blockbuster performance, up by 1.9% during the month.
On a year-on-year basis, industrial production was 1.2% higher than June 2012, and manufacturing output gained 2%.
City economists hailed the news, which comes hot on the heels of the strongest growth in the services sector since the end of 2006.
More good news for the UK economy as Industrial Production rose by 1.1% between May 2013 and June 2013 and by 1.2% Y-O-Y #business
— Shaun Richards (@notayesmansecon) August 6, 2013
More decent growth figures – will be fascinating to see when or if this starts to translate into people feeling the recovery is happening
— Jess Brammar (@jessbrammar) August 6, 2013
You can see the full data here.
Encouragingly, every sector of UK manufacturing posted growth in June – the first time in 21 years.
Want a broad based recovery? All 13 categories within manufacturing recorded an increase in June. 1st time that has happened since June 92
— World First (@World_First) August 6, 2013
The ONS also reported that production output rose by 0.6% between Q1 2013 and Q2 2013, while manufacturing rose by 0.7%.
This graph shows how the long-awaited recovery in the industrial sector has begun:
Updated
28,000 Italians apply for 200 IKEA jobs
Proof that Italy’s labour market is in a serious mess — home furnishings store IKEA advertised 200 vacancies in Pisa and received more than 28,000 applications.
IKEA was swamped with demand from people keen to work at its new store in Pisa, and is now sifting through the pile of CVs that landed in its HR department.
Italy’s headline unemployment rate is now 12% – or 39% for young people. As Gaià Paradiso, a 25-year-old student, put it:
IKEA is a multinational company and can provide work benefits…competition is strong and it is very hard to find something that specifically matches your profile, so everyone applies for the same company.
Here’s the full story: More than 28,000 Italians apply for 200 Ikea jobs
28,616 applications for 200 jobs at an IKEA in Pisa. Incredible. #Italy
— Alberto Nardelli (@AlbertoNardelli) August 6, 2013
This isn’t the first time IKEA has been deluged from applications from willing workers in Southern Europe. In July 2012, it tried to fill 380 vacancies at a new store near Barcelona. More than 55,000 people applied….
In Greece, job losses as Communist party sells media network
Back in the eurozone, and Greece is digesting the surprising news the economic crisis has hit the radio and TV stations owned by the country’s once powerful KKE communist party.
After leading the way in protests against austerity measures demanded in return for loans from the EU and IMF, the party has announced it will shut down the broadcaster (as our regular readers flagged up in yesterday afternoon’s blog).
Here’s Helena Smith, our Greece correspondent, with the full story:
Even the KKE has had to bow to the inevitable: cost-cutting in the modern age. Taking a leaf out of the hated handbook of its neo-liberal enemies, the communist party has caused shock and awe announcing the sale of its 902 radio and television stations to an, as yet, unnamed private investor. The transfer is expected to be concluded by the end of August. All 48 staff will be laid off with immediate effect. For the remainder of the month, the party-funded channel will play music and cultural shows.
“Throughout the four years of the economic crisis the radio-television company, and through their work, employees, … have applied huge efforts to ensure the station could endure the economic difficulties,” the party said in a rambling press release that acknowledged it would be criticized for the move. “Despite all the efforts and the support of the KKE, the worsening of the station’s economic situation has not been possible to avoid.” What was of utmost importance, it insisted, was “fulfilling the obligations of the station to its workers and insurance funds.”
The decision ends two decades of the broadcaster being on air. The nearly 100-year-old daily, Rizospastis, the party’s mouthpiece [motto: “proletarians of the world unite”’] now becomes the KKE’s only official medium although 902 will continue to have a presence on line.
The communist party has spearheaded opposition against the “barbaric measures” meted out by successive governments since the eruption of the euro zone crisis in Athens in late 2009. More than any other political force, the KKE has protested vehemently against public sector job cuts denouncing them, at a time of record unemployment in Greece, as the cruellest of measures so far.
Tellingly, it was 902 that rushed to the aid of the state-run channel, ERT, rebroadcasting pirate programs aired by ERT employees when prime minister Antonis Samaras ordered the station to be shut down overnight.
In that case, ERT’s nearly 2,700 staff occupied the company’s headquarters in Athens. How workers at 902 will react still remains unclear. Employees were told in no uncertain terms this week that short of accepting a “a haircut” on their salaries (rumoured at around 40%) they would not be able to retain jobs in the party (the majority will be moved on to two other business enterprises owned by the KKE).
Support for the communist party, once one of the wealthiest organisations in Greece, has dwindled dramatically since the crisis began. But four years of battling neo-liberal policies have, it seems, also paid off: the comrades in arms have learned how to mimic their enemy well.
Updated
Italian industrial production data
Just in — industrial output data from Italy, which shows that factory production rose slightly in June, but remains much weaker than in the summer of 2012.
Industrial output rose by 0.3% month-on-month in June, following a 0.1% rise in May.
On an unadjusted annual basis, output was more than 5% lower than a year ago – a hefty fall. But if you adjust for differences in working patterns this year, the decline narrows to 2.1%. Analysts had expected a bigger fall, of -3.3% to -3.5%.
Italian data a touch better than expected … m/m in line at 0.3% ; the WDA is -2.1% v -3.5% expected … but the unadjusted raw down 5.1% .
— Steve Collins (@TradeDesk_Steve) August 6, 2013
Updated
An Englishman’s house is an increasingly pricey castle
Italy may be shrinking, but UK house prices are rocketing upwards.
Today’s Halifax house price survey show that the cost of a home jumped by 4.6% on an annual basis in the three months to July, which is the biggest year-on-year rise since August 2010.
Prices picked up by 0.9% in July alone, meaning the average house prices reached £169,624 in July.
Halifax’s chief economist Martin Ellis said that recent signs of improvement in the UK economy had boosted consumer confidence, luring more people onto the housing ladder.
If you’re selling up, you might also like to thank George Osborne for his Help to Buy bubble-inflater scheme. If you’re trying to buy.. well, fingers crossed that it works out for you…
The UK #helptobuy #houseprice boom looks well underway as the Halifax records house prices rising at an annual rate of 4.6% in July.
— Shaun Richards (@notayesmansecon) August 6, 2013
Updated
Some like it hot… but not Greggs
In the City, bakery chain Greggs has hit shareholders with a profit warning. It appears some shoppers have shunned its delicacies as they basked in the deliciously warm weather instead.
Greggs shares are down almost 9% after it cut its earnings forecast for the year, and said:
Trading in the first five weeks of the second half to 3 August has been impacted by the heat-wave with like-for-like sales falling by 3.2 per cent compared with the same period last year.
It’s understandable that demand for sausage rolls and steak slices dipped during a sweltering July. But, as IG’s Brenda Kelly reminds me, this is Greggs’ second profits warning of 2013 – in April it blamed the snow….
@graemewearden they blamed the cold weather for the profit warning earlier this year. like-for-like sales in stores dropped 4.4% then too
— Brenda Kelly (@BrendaKelly_IG) August 6, 2013
This classic Calvin and Hobbes cartoon may apply…..
Updated
Ireland joins the service sector party
Encouraging news for Ireland this morning — its service sector posted its biggest jump in activity in six years.
Data released by Markit showed the Irish Services Purchasing Managers Index jumped to 57.6 in July, from 54.9 in June. That shows that growth picked up pace (the PMI is based on interviews with firms across the country).
Further evidence that many economies performed well in July — yesterday’s liveblog was peppered with improved PMIs from the UK, the eurozone and the US.
Updated
Australian rate cut
Overnight, the Reserve Bank of Australia became the latest central bank to ease monetary policy, by cutting interest rates to 2.5%
The quarter-point cut brings headline borrowing costs in Australia down to their lowest in over 50 years.
My colleague Greg Jericho covered the action here:
Interest rates cut to 2.5% by Reserve Bank – live blog
As he pointed out, this still leaves Australian rates much higher than the eurozone or UK, where they’re at record lows of 0.5%.
Updated
The agenda
The Italian growth (or non-growth) figure are the main eurozone economic event of the morning, in under two hours time. Here’s what else is coming up too:
• UK industrial production data for June – 9.30am BST
• Italian GDP data – 10am BST (11am CEST)
• German factory orders for June (11am
• Latest estimate of UK GDP from the National Institute of Economic and Social Research – 3pm BST
Updated
Is Italian economy still shrinking?
Good morning, and welcome to our rolling coverage of the latest events across the eurozone, the financial markets and the global economy.
Italy is in focus this morning, with the release of second-quarter GDP figures that will show how its economy fared between April and June.
Analysts predict that the Italian economy shrank by 0.4%, which extend its recession into eight quarters. It’s already the longest slump since records began in 1970. On a more positive note, that would be an improvement on the 0.6% decline in Q1 2013.
The data is released as Italy remains engrossed by the future of Silvio Berlusconi, and the impact his tax fraud conviction, jail term and public office ban will have on the country’s coalition government.
As Michael Hewson of CMC Markets warns, the Silvio Show is a damaging distraction for prime minister Enrico Letta.
With a debt to GDP ratio rising to 130% of GDP and unemployment at 12.1%, the Italian economy desperately needs the government to continue its economic reform program, or run the risk of losing being on the receiving end of another ratings downgrade and risking the current stability in the bond markets.
Unfortunately Italian PM Letta is not being helped by the media circus surrounding the Berlusconi trial and verdict, which is preventing him from pushing on with a reform program. The fragility of the coalition remains the biggest obstacle to the next steps in this particular economic story.
I’ll be tracking all the news through the day….
Updated
Source: Italy's recession deepens with 0.2% drop in GDP, but UK economy bounces back - live
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