with so many different news/views (business say yes, governments say no) on recession. Is it really coming?
Originally Posted by www.straitstimes.comhttp://www.straitstimes.com/Money/St...ry_268304.html
BRUSSELS: The German, French and other Eurozone economies braked sharply in the second quarter, shrinking for the first time in more than a decade.
The data, coupled with a report from the United States that home foreclosure notices jumped by half last month, creates a worrying picture of a global economy on the brink of recession.
Singapore is also feeling the pinch, with the Government calling on Singaporeans last week to brace themselves for a bumpy year ahead.
The growth forecast for the full year has been revised down to between 4 and 5per cent, from an earlier projection of 4 to 6per cent.
With high fuel and food prices holding back consumer spending, growth in the 15 economies that share the euro currency contracted by 0.2per cent from the first quarter, expanding just 1.5per cent from the same period a year ago, the European Union's statistics office, Eurostat, said.
Eurostat said the quarterly decline was the first since its data series for the euro zone started in 1995.
A second successive quarterly drop in growth will officially put the eurozone into recession.
'There is a good chance that the economy is already in recession, but even if it isn't, the outlook remains for subdued growth in the quarters to come,' said Mr Stuart Bennett, senior forex strategist at Calyon.
The world's second biggest economy, Japan, is also flirting with recession, having shrunk 0.6per cent in April-June, but the United States grew by 0.5per cent.
The eurozone fall was driven by Europe's two largest economies, Germany and France.
The German economy, the world's biggest exporter, contracted by 0.5per cent in the second quarter from a 1.3per cent rise in the first quarter.
While the fall was smaller-than-expected, it was the first fall in almost four years, driven by a slump in the construction sector, hurt by the credit crunch.
The stronger euro and weakening global growth have also dampened demand for German exports while higher inflation has curbed domestic spending.
France, Europe's second biggest economy, suffered a sharper 0.3per cent drop in second quarter growth. In another blow, the expansion previously reported in the first three months of the year was also trimmed.
In Spain, a country whose economy looks especially vulnerable because of its boom-to-bust housing market, the economy eked out growth of 0.1per cent in the second quarter, a figure greeted with scepticism by some analysts.
Only one EU country is now in recession: the small Baltic economy of Estonia.
Eurostat did not give a figure for Ireland, once a booming tiger economy, but which contracted in the first quarter.
France's Economy Minister, Ms Christine Lagarde, pointed out that France was suffering along with other European countries from an unfavourable global environment, but said the fundamentals of the French economy were sound.
She noted easing crude oil prices and signs that inflation had stabilised, and said the situation should begin to improve at the end of the year and the start of next year.
'There is no question of a recession,' she said on radio.
But some economists were less optimistic.
Business and consumer confidence in the euro area plunged to the lowest level in more than five years in July.
The euro jobless rate also started to climb in April from the all-time low it reached in December.
Meanwhile, in the US, more than 272,000 homes received notice of a mortgage default, forced sale or bank repossession last month, up 55per cent from the same month last year, according to RealtyTrac, which records property in various stages of foreclosure.
That means one in every 464 US households received a foreclosure filing last month.
The combination of weak housing sales, falling home values, tighter mortgage lending criteria and a slowing US economy has left financially strapped homeowners with few options to avoid foreclosure.
Many cannot find buyers or owe more than their home is worth and thus cannot refinance into an affordable loan.
Even with more government help on the way, nearly 2.8million US households will either face foreclosure, turn over their homes to their lender or sell the properties for less than their mortgage's value by the end of next year, predicts Moody's Economy.com. ASSOCIATED PRESS, REUTERS