Small, Steady Growth For Europe's Economy
Comment of the Day

October 24 2013

Commentary by David Fuller

Small, Steady Growth For Europe's Economy

This is an encouraging report by the International New York Times (subscription registration may be required for the full article; a PDF is in the Subscriber's Area). Here is the opening
PARIS - Europe's fragile recovery remains alive, according to the results of a closely watched corporate survey released on Thursday.

The composite purchasing managers index compiled by Markit Economics, a data and analysis firm, came in at 51.5 in October, above the 50.0 mark that signals expansion. While that is a slight deceleration from September's 52.2 showing, it was the fourth consecutive month in positive territory.

The growth trend is a "modest" one, Chris Williamson, Markit's chief economist, noted, but "the expansion is reassuringly broad-based across the region, reflecting signs of economic recoveries becoming more entrenched in the periphery as well as ongoing expansion in Germany and stabilization in France."

The report was the latest to reinforce the message that after lurching from the Lehman Brothers crisis five years ago to its own sovereign debt problems, Europe appears to be struggling to its feet. The euro zone officially exited recession in the second quarter with a small upturn. On Wednesday, the Spanish government said the country's economy pulled out of a two-year recession in the third quarter with a modest expansion.

More positive news arrived from Spain on Thursday, as the National Statistics Institute said in Madrid that the jobless rate dipped to 26 percent in the third quarter from 26.3 percent in the second quarter. While joblessness in Spain remains at depression levels, and that of the overall euro zone is elevated at 12.0 percent, both appear to have reached a plateau.

Daimler, the maker of Mercedes cars, underscored that outlook on Thursday, reporting that car demand has "stabilized at a low level in Western Europe, and a gradual improvement of the market situation is to be anticipated in the rest of the year." The German automaker also announced a third-quarter net profit of 1.9 billion euros, or $2.6 billion, up 53 percent from a year earlier.

David Fuller's view I attribute this to the economic savvy and tactical diplomacy of ECB president Mario Draghi - an exceptional central banker. Daimler and most other European corporate Autonomies have also benefited from good management and the somewhat stronger global economy.

Europe's gradual economic improvement and Euro STOXX 50's retesting of previous resistance just over 3000, are further evidence that extreme pessimism following a global stock market crash, while a reoccurring aspect of investor sentiment, is invariably wrong.

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