As the world waits to see if America will step away from a voluntary default on its debts and plunge the global economy into chaos, further news has emerged in Europe of a strengthening recovery.
Data for industrial output within the Eurozone show that it has enjoyed its best performance for two years (bear in mind all of the data is relative and it comes off a low base). Across the 17 member bloc, average industrial output beat analyst’s expectations to come in at 1% for August. Naturally, the picture for industrial output was not even across the bloc.
Portugal was the third nation to need an EU/IMF bailout and has endured harsh austerity measures as the government seeks to get the deficit within control and reform social and employment policies. In August, Portuguese output showed the highest growth in the Eurozone, coming in at 8.2%.
Italy’s industrial output slipped by 0.3% in August falling for a second consecutive month, the Italian economy is the third largest in the Eurozone. The fortunes of the second largest economy in the bloc, France’s, improved in August with output struggling higher by 0.2% and ending three months of decline. The bloc’s powerhouse economy, Germany, saw output increase by 1.8% in August. Between these three nations, something like two thirds of the overall production of the Eurozone is accounted for (Europe’s other large economy, the UK, is outside of the bloc, of course).
Whilst the Eurozone emerged from recession at the end of Q3 which had lasted for 18 months, industrial output within the bloc still lags 12.5% below its peak value before the Global Financial Crisis struck.
If the American politicians do not come to their senses before America enters a partial default (17/10/13), the loss of confidence amongst investors will ripple around the world and is likely to trigger a fresh recession which some analysts suggest may be worse than crisis we are still recovering from.