Europe Round Up - German Economic Outlook Turns Gloomier

Tuesday, several key data released during the day added to the gloomier outlook for the German economy. Business confidence in the largest Eurozone economy fell to a three-year low, while consumer confidence declined further.

Further, the contraction in the economy during the second quarter was confirmed. Eurozone The German business confidence deteriorated more than expected in August, reaching the lowest level in three years, as the economy experiences a more difficult situation. Firms have assessed the current business situation as clearly unfavorable and projected further negative development in the coming half year. The business survey results released by the Munich-based Ifo research institute revealed that the business confidence index fell to 94.8 in August, declining for three consecutive months. Economists had expected the index to fall to just 97.2 from July's 97.5. Elsewhere, a monthly survey from the GfK Group showed that German consumer confidence, which was depressed by subdued economic outlook reached the weakest level since 2003. Consumer confidence for September dropped to 1.5 points from August's 1.9 points. A detail report from the statistical office showed that the German economy shrank in the second quarter for the first time in almost four years on reduced investment in construction as well as machinery and equipment. The economy contracted 0.5% sequentially in the second quarter, after expanding 1.3% in the first quarter. On a yearly basis, the economic growth stood at 3.1%, larger than the 1.8% in the first quarter. The calendar adjusted Gross Domestic Product, or GDP rose 1.7% compared with 2.6% in the prior quarter. France's Ministry of Ecology and Sustainable Planning and Development said in a report that housing starts declined 11.8% in the three-month period to July. This was slower compared to a 28.2% fall recorded in the three-month to June. Meanwhile, housing permits dipped at a faster pace of 16.6%, compared to a 15.3% decline seen during three-month period to June. Spain's National Statistics Institute lowered its gross domestic product, or GDP growth for 2007 to 3.7% from initially reported 3.8%. At the same time, the statistical office kept the growth figures for 2004, 2005 and 2006 unchanged. According to the statistical office, weak contribution of domestic demand led to a downward revision of growth. The Statistics Finland announced that the country's unemployment rate dropped to 5.2% in July from 6.8% recorded in June. The rate also eased from the 5.9% recorded in the previous year. Economists were looking for a jobless rate of 5.3% for July. The number of jobless stood at 144,000 in July, smaller than the 161,000 in previous year. Rest of Europe The British Bankers' Association said mortgages approved for house purchase continued to be low in July, indicating that the housing market is unlikely to start recovering in the near term. The number of mortgages approved in the UK for house purchases rose to 22,448 in July from 22,369 in June. Approvals for house purchase fell 65% over the previous year. The Swiss UBS consumption indicator decreased significantly in July after recording a temporary increase in June. According to a report from the investment bank UBS, the consumption indicator fell to 1.85 in July, marking the largest correction seen during a single month for just under a year. The indicator fell from 2.22 in June, revised from 2.25 reported earlier. At its current level, the UBS consumption indicator signals that Swiss consumer spending remains healthy, though the outlook is deteriorating. UBS expects real private consumption to grow 1.8% in 2008. However, the UBS said the recent hike in inflation coupled with the economic downturn tarnished this outlook. Denmark's finance ministry lowered its economic growth outlook for 2008 and 2009, citing higher commodity prices fueling inflationary pressures. The ministry projects the economy to grow 1.1% in 2008, down from 1.2% estimated in May. The economic growth is forecast to decrease to 0.5% in 2009, revised from 0.7% initially predicted. At the same time, the government hiked inflation forecast for the current year to 3.5% from 3.3% due mainly to higher prices for energy and food. However, the rate of inflation is expected to slow to 2.7% in 2009. Inflation outlook for 2009 was raised from an earlier prediction of 2.6%. The Statistics Sweden reported that the Producer Price Index or PPI rose 3.3% year-on-year in July, quicker than the 3% rise recorded in June. Economists expected the rate to remain unchanged at 3% for July. On a monthly basis, producer prices rose 0.7% in July, following a monthly growth of 0.5% in June. The consensus forecast was for a monthly increase of 0.4%. The Central Statistical Office announced that the Poland's unemployment rate dropped to 9.4% in July from 9.6% recorded in prior month. A year ago, the rate was 12.1%. The jobless rate declined for the sixth month in a row, falling from 11.7% in January. The jobless number stood at 1.42 million persons, down from 1.46 million recorded in June. The jobless number fell 32,400 from June. The statistical office also reported that Poland's retail sales rose 14.3% year-on-year in July, a notch higher than the 14.2% rise recorded in June. Economists had expected the growth to decline to 14% for July. Month-on-month, overall retail sales increased 1.8% in July versus 2.4% rise seen in the previous month. The rate stood well below the 2.1% rise expected by the economists. In a widely expected move, the National Bank of Slovakia maintained its two-week repo tender limit rate at 4.25%. The central bank also retained its overnight sterilization rate at 2.25% and the overnight refinancing rate at 5.75%. This is for the 16th consecutive month the central bank is holding its rates. Copyright(c) 2008 RealTimeTraders.com, Inc. All Rights Reserved