The European continent confidence reports showed better-than-expected economic confidence as it rose to the highest level since October 2008, boosted by the decline in the value of the 16-nation currency which supported exports and helped the economy expand at the fastest pace since 2006.
The Final Consumer Confidence reading for August reached -11.0, compared with the previous and the expected -12.0, while the industrial confidence remained unchanged at -4.0, the economic confidence and the services confidence rose to 101.8 and 7.0 respectively, compared with a month earlier of 101.3 and 6.0.
Analysts expected that economic confidence will rise to 101.6 and for the services confidence to remain unchanged at 6.0. Nevertheless, economic conditions around the globe are witnessing a slowdown in activities, which could results to a drop in confidence over the upcoming period, despite the fact that ECB Chairman, Juan-Claude Trichet said that the bank expect the recovery to continue into the third quarter after better than expected growth in the three months running through June.
But the challenge in Europe remains with elevated unemployment, tight credit conditions along with government’s huge budget deficits, that forced major powers in the continent to impose tougher regulations on institutions, imposing new or raising current taxing levels, reducing public sector wages and slashing government spending in order to trim budget deficits.
Euro-zone economy showed various fundamentals of improving conditions along with rapid increase in exports, where the industrial and services sector continue on expanding while confidence rose to the highest levels in nearly two years.
The U.K.’s economy expanded during the second quarter of this year by 1.2%, beating the previous and expected 1.1%; on the other hand, the U.S. witnessed a slower expansion during the same period, where the U.S. economy expanded by 1.6%, below the previous 2.4% but higher than the expected 1.4%.
Spending patterns around the globe are weak, causing major economic powers to witness a slowdown in activities. Cooling economic conditions in the world forced a downside revision for growth across major economies in the world. The U.K. government's expectations for growth was downgraded for 2010 to 1.2%, compared with earlier projections that expected a growth rate of 1.3%. As for the upcoming year, the U.K. government expect growth to reach 2.3% from earlier expectations that was set at 2.6%.
ECB projections are for this year’s growth rate to near 1.0%, and to continue on expanding throughout the upcoming year by 1.2%. But the debt crisis in the region forced banks to tighten its lending, accordingly, banks' ability to borrow and fund loans to consumers might worsen over the third and fourth quarters of this year.
As for the euro-zone, fears dominated among investors after sovereign debt problems, but improving conditions throughout the past period helped unwind the tension gradually across various sectors and pushed the economy forward, which was assured by Trichet during the prior rate decision.
These statements assure that the recovery is still intact, even as it’s surrounded with uncertainty, but the European region benefited from the current decline in prices, accordingly, the recovery will be different from one country to another.
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