THE Eurozone Economics Thread pt 1 (merged) Archived

[Ferretlover]

Belgium is the Eurozone's indicator economy, meaning that both the statistical and economics departments of the Eurozone as the individual governments take its numbers as a standard for predicting the future of their own economies.

Things don't look good. The latest "flash-estimate" shows that growth in the first quarter has slowed down to 1.9%, while inflation on year basis is the highest in four years (now at 3,1%).

The blame is put squarely on high petroleum prices.

Consumer confidence has dropped to lowest levels in 19 months. Entrepreneurial confidence has dropped to lowest levels in 48 months (!!).

We can expect some dreadful news coming out of the UK, Germany and France soon.
See: De Standaard.

[Aaron]

So much for the "We can grow our economies and lower energy use" idea huh?

[Wildwell]

The UK is not doing too badly. There are clouds on the horizon though:

- The housing market is slipping - prices are down in some areas. Mind you this is to be expected, most of the housing stock is unaffordable for first time buyers. The average price is over $300,000 and you would be lucky to find anything under $170,000 anywhere.
- Consumer confidence is low. Some stores are having ongoing difficulties, mainly traditional chains and shops. The large supermarkets are growing very well though. It’s unclear how much of this is due to changing shopping habits and the internet.
- Manufacturing is having problems, especially because of high oil prices and the strong pound.
- The Trucking industry is on its knees because of the European working time directive coupled with short labour supply and high fuel prices.
- Unemployment is up for the 4th month on a row. Large scale redundancies in at some firms. Eg Rover
- Growth is still strong but is slowing

The only maverick with fuel prices are airlines, with the growth in cheap foreign breaks still growing strongly. However a downturn in the economy and aviation fuel tax may change that.

http://news.bbc.co.uk/1/hi/business/4471611.stm

[Wildwell]

So much for the "We can grow our economies and lower energy use" idea huh?

We're based on oil atm, doesn't take a lot of working out. There are exceptions atm as I said: Airlines, ironically the industry based on oil more than virtually anything else.

http://news.bbc.co.uk/1/hi/england/london/4493197.stm

[smiley]

So much for the "We can grow our economies and lower energy use" idea huh?

annual change in gasoline consumption (source IEA)

France -5.1%
Germany -3.5%
Italy -3.8%

USA +1.7%

http://omrpublic.iea.org/currentissues/full.pdf

We can lower our energy consumption while keeping our economies running.

[Wildwell]

Another thing I ought to add: Surely, there is a severe mis-allocation of resources, if airlines and car transport is growing like mad – big users of oil and luxury uses. Yet, farming and trucking is on its knees because if high fuel prices caused by growth in the former.

I think it's a lot more complex than oil prices in any case. There is a whole bunch of other issues afoot, from immigration pushing up housing prices and lowering wages, more credit since heavy deregulation took place in the late 1990s, changes in shopping and buying habits, changes in social habits and so on and so forth. A lot of the job losses are because firms are moving abroad to China and India because of high wages here and cheap energy.

[Aaron]

So much for the "We can grow our economies and lower energy use" idea huh?

annual change in gasoline consumption (source IEA)

France -5.1%
Germany -3.5%
Italy -3.8%

USA +1.7%

http://omrpublic.iea.org/currentissues/full.pdf

We can lower our energy consumption while keeping our economies running.

The latest "flash-estimate" shows that growth in the first quarter has slowed down to 1.9%

[smiley]

The latest "flash-estimate" shows that growth in the first quarter has slowed down to 1.9%

So, 1.9 percent is still growth in my book.

[ECM]

So much for the "We can grow our economies and lower energy use" idea huh?

annual change in gasoline consumption (source IEA)

France -5.1%
Germany -3.5%
Italy -3.8%

USA +1.7%

http://omrpublic.iea.org/currentissues/full.pdf

We can lower our energy consumption while keeping our economies running.

Gasoline is a very small part of Europe's energy consumption. Isn't Europe moving away from gasoline and using more diesel? All total energy consumption in Europe is up not down.

[Licho]

Well even -5% annual GDP change is "keep running" imo.. World doesn't fall apart when economy shrinks a bit, but eurozone economy apparently still grows, 1.9% is a nice number, higher than in Japan or USA few years ago..

And regarding gasoline vs. diesel - vast majority of cars is still running with gasoline engines, but it's true that diesel consumption is increasing..

[Enquest]

The first 3 months of the Belgium Economy had a 0% grow. With growing fears of recesion. Scape goat are the high oil prices

[Madpaddy]

Some economists are even talking about an ECB rate cut before the end of the year because of the anaemic growth rates.

A LEADING economist yesterday predicted that the European Central Bank (ECB) will take dramatic action by the end of the year and cut lending rates by up to half a percent.

Thomas Stolper, a global markets economist with Goldman Sachs, said he expects a rate cut in the third quarter after evidence of weakening industrial activity across the eurozone.

His view was at odds with those expressed in separate surveys of economists carried out by Reuters and Bloomberg, while Bank of Ireland economist Dr Dan McLaughlin said the ECB will raise rates later this year - as soon as evidence emerges that growth in the eurozone is back on track.

And a survey of economists carried out by Reuters showed that most economists have pushed back the timing of a eurozone interest rate rise, with only a slim majority expecting the European Central Bank to hike this year, due to shaky economic growth and tame inflation.

All 72 economists surveyed between April 25th and 27th said the ECB will leave its key lending rate at a historic low of 2pc when it meets on May 4.

Making his case, Mr Stolper cited fresh economic data which he said suggests European manufacturing shrank in April for the first time since mid-2003, when the ECB last cut interest rates. ECB policy makers have kept their main interest rate at 2pc since June 2003, the lowest for the 12 nations sharing the euro in six decades, to stoke growth.

What are peoples views on this. I think that there will be an initial rate cut which will not work as the economy will be hit too much by the high oil price. Eventually inflation will rise rapidly forcing very sharp interest rate rises some time in 2006. If there is a rate cut I plan on fixing my mortgage for 5-10 years. Even if there is no rate cut I will fix the mortgage for 3 years before the end of June when my contract with the bank allows me to do so.

[Aaron]

Simmons

[Wildwell]

Much of the oil problem is about misallocation of resources:

Too much road travel, estimated to be costing Britain £30bn in the next ten years per year.

http://news.bbc.co.uk/1/hi/uk/4494821.stm

Cheap flights, with no tax on AV gas.

Then you have problems with farmers staying in business and manufacturers costs rising. IE the things we don't need or should be more expensive are going through the roof and the things we do need (like agriculture) need to be subsidized because of increased use. Madness.

Oh and this problem

http://news.bbc.co.uk/1/hi/health/4496947.stm

I note it is generally Americans that believe energy = money, I wonder why that is...

[Aaron]

Much of the oil problem is about misallocation of resources:

WW...

Crosslink our big fight into this thread. Same topic...

I thought that might be easier than going for each others jugular again

(I would but I don't remember which one it was)

[smiley]

Some economists are even talking about an ECB rate cut before the end of the year because of the anaemic growth rates.

"Some" economists have been arguing about that for a few years now. That's just wishful thinking from investment banks, who want lower rates so they can get more profit.

It is not going to happen. Both Trichet and Duisenberg are currently preparing the market for a rate hike later this year, so unless there are some stunning developments (like an A380 crashing into the Eifeltower), that is what is going to happen.

[Wildwell]

Much of the oil problem is about misallocation of resources:

WW...

Crosslink our big fight into this thread. Same topic...

I thought that might be easier than going for each others jugular again

(I would but I don't remember which one it was)

No need. We’re going to get an oil crash (not a permanent one) because the way we are set up – which is where you’re right and I agree. There’s a nice news story on the front on the site at the moment which sums it up quite nicely, people spend more money on car fuel and less on other goods, so it affects the economy that way among others. That’s what I mean about a mis-allocation of resources; all the systems have been built on this short term finite supply. But when the dust settles as long as the same mistakes are not made (although I bet they are) similar things can be done with less energy and energy does is not directly equal to money, a point which I stand by. You always get crashes and booms in classic economics anyway.

[The_Virginian]

energy does is not directly equal to money, a point which I stand by. You always get crashes and booms in classic economics anyway.

I'll bet we all agree in principal to that.

However, our economic system is set up to use energy to MOVE Goods (auto's, washing machiesns etc.) services (electricity down the wire, flights to Austrailia etc.).

I don't even beleive that fiat paper is MONEY, it is monitized DEBT (which is how they zing us with legal loopholes to tax our property cause we paid for it w/ debt ).

We must face the Muscaria salad "reality" we are in, and accept that we will not GROW economies with a reduction in potential energy...even conservations has it's limits, and after we pass that (or achieve that with Jevon's Paradox http://en.wikipedia.org/wiki/Jevons_paradox )...the world will have to find a better system or "crash" into a more primitive one.

In the historical sense, economies have crashed and burned using Gold and Silver (Rome 300's etc.), but it did not happen indipendent of CONTRIBUTING FACTORS:

http://www.roman-empire.net/articles/article-018.html

http://en.wikipedia.org/wiki/Edict_on_Maximum_Prices

[Ferretlover]

The export intensive Eurozone is growing at its fastest pace since the dot-com boom in 2000 - despite record oil prices and despite a strong €uro.

Reuters video.

[mrobert]

From what I know, Germany has a huge industry (they build stuff) ... Austria bought our oil reserve wotrth 10 billion, for a half a billion, and some banks.
The french and the germans bought our gas company.

Now they resell our $10 crude for $75.
Nice hedging

And offcourse, the economy works