Yet another night of dour European data::
The unemployment rate in the 17-nation euro zone rose to 11.6% in September, the European Union statistics agency Eurostat reported Wednesday, topping the previous record of 11.5% seen in August. The total number of unemployed rose by 146,000 to 18.49 million. Economists surveyed by Dow Jones Newswires had forecast a rate of 11.5%. Southern Europe continues to suffer the worst, with the unemployment rates in Spain and Greece both topping 25%. Youth unemployment across the euro zone also rose, hitting 23.3% in September from 23%.
And here is the full report from EuroStat.
Nothing much more to say really. Totally expected and forewarned of , but no less stark when you see the numbers and trend in front of you.
In other poor data the ECB released its quarterly bank lending survey for Q3 2012. This is my favourite survey of its kind because it provides both supply and demand metrics and is also broad in its data capture. We’ve already saw some preliminary credit data that suggested this survey was going to be disappointing, and it was.
On the supply side:
- Net tightening of credit standards by euro area banks for loans to enterprises
- Stable credit standards by euro area banks for loans to house purchase
- Net tightening of credit standards declined for consumer credit
- Funding costs lowered credit tightening, but this was offset by risk perception especially in the area of loans to enterprises
- Margins on loans remained relatively stable for the quarter
- Future expectations are for a net tightening of credit standard for both enterprises and households
and demand:
- A pronounce decline in demand for loans to enterprises, deteriorating further from Q2
- M&A, inventories and working capital seen as the major reasons for lack of enterprise demand
- Continuing net decline in demand for loans to households for house purchases accelerated in Q3 from Q2
- Continuing net decline in consumer credit, although rate of decline slowed
- Future expectations are for continuing decline in demand for credit from both enterprises and households, although at slower rate
So, as with the Q2 survey, we continue to see a “balance sheet recession” like response from Europe’s citizen. Credit is available, although tightening slightly, but no one really wants it even at low interest rates. Given economic conditions across much of the zone this obviously isn’t a surprise, but it once again highlights the challenge the ECB is having transmitting its highly accommodative monetary settings into economy.
Full survey report below.
Euro Bank Lending Survey Q3 2012
The other obviously bad news was the latest report on the Greek budget ( if you can read Greek it is here). Again this probably isn’t a surprise to MB readers, but the numbers are particularly bad.
- Government debt to GDP now expected to be 189.1% up from an already highly revised previous estimate of 179.3%
- New target for government deficit is 5.2% up from 4.2%
- An economic contraction of 4.5% in 2012 up from 3.8% in previous estimates
- A primary surplus of 0.4% of GDP down from 1.1% in previous estimates
Just to make sure you are clear on just how far Greece is now off track, here is chart from ZeroHedge comparing the revised data with initial Troika estimates in the first program.
Obviously, given history, it is not hard to be cynical about these latest figures even though they are worse than expected. I’ve stated previously that there really is not point providing more funding to Greece. If for political reasons the country is destined to stay in the Euro then what is needed is a further substantial debt write-down. That, however, may not stop the EU bureaucracy from once again repeating their failed plans.
In the lead up to an election year Angela Merkel is very unlikely to want her country’s taxpayers to realise actual losses, and the most likely outcome is for a program extension at additional cost. There does, however, appear to be growing opposition within the Bundestag to providing any more aid and this latest budget update certainly will not help.
Greece is slowly, but painfully, passing laws as requested by the Troika in order to meet its requirements under the program, but we will still have to wait for the final Troika report before we get an official decision from EU leaders on what happens next.
And finally, in case all of that wasn’t bad enough, here is the report on Spanish GDP for Q3. Again poor.