Is it the beginning of the end? Maybe….

Last Tuesday, Eurostat, which provides statistical information on the European Union (EU), announced that its flash estimate showed positive economic growth (up 0.3 percent) for the Euro area for the second quarter. Media outlets embraced the news with tremendous enthusiasm and some informed the world that Europe was, once again, on its feet. 

  • Euro Zone edges out of recession – BBC
  • Germany, France Haul Euro Zone Out of Recession – Reuters
  • Euro Zone Emerges from Recession – The Wall Street Journal
  • Euro Zone Exits Longest Recession in Over 40 Years – CNBC

While it’s possible the second quarter will prove to be a turning point for Europe’s economy, the headlines were a bit rash. Perhaps the blog, written by Ollie Rehn, European Commissioner for Economic and Monetary Affairs, should have been read before crafting their headlines. Rehn wrote:

“Add today’s quarterly GDP figures to other recent positive survey data and you will find reasonable evidence suggesting the European economy is gradually gaining momentum… I hope there will be no premature, self-congratulatory statements suggesting “the crisis is over.” For we all know that there are still substantial obstacles to overcome: the growth figures remain low and the tentative signs of growth are still fragile; the averages hide important differences between Member States… So there is still a very long way to go before we reach our ultimate goal of a sustainable growth model that delivers more jobs.”

Officially, the end of the Euro area recession will be determined by the Centre for Economic Policy Research (CEPR). This organisation is similar to the Office of National Statistics (ONS) in the UK. In both regions, business cycle dating is a tricky business. The CEPR assesses GDP and other factors, such as the components of output and labour market data when determining the start and end dates for recessions and expansions. One of the biggest hazards to cycle dating is data revision so you can be sure the CEPR will be paying attention when Eurostat issues revised second quarter numbers in early September.

 
 
 

Lexington Wealth Management