Monday, December 30, 2013
Something that doesn't seem to have been in the news much of late is the state of the European economy. I was curious to catch up on this, so here is a short graphical summary of the latest official data (from Eurostat). The data in most graphs start at the beginning of 2005 or last quarter of 2004 - so they show decent growth for the first year or two, then the onset of the great recession in late 2007 and 2008, then the partial recovery of 2009/2010, which ended in a second decline in 2011.
Here, first, is Europe-wide industrial production, which shows a very weak recovery in 2013, though most of the very slight gain was lost in the last couple of months of data.
Retail trade has a very similar pattern:
Here is real GDP growth, quarter-over-quarter, with the US for comparison:
Q2 and Q3 of 2013 were the first clearly positive quarters in quite a while, but growth was still extremely weak, and in particular much weaker than in the US, which has not incurred a double-dip recession in the same way (though growth has not been exuberant there either).
Next is the unemployment rate:
European unemployment has stopped getting worse in 2013, but has not really started to go down on a continent-wide basis.
If we look particularly at the "PIIGS" countries that were at the epicenter of the sovereign finance crisis of 2010-2012, we can see their unemployment rates as follows:
Ireland and Portugal have clearly improved in 2013. Greece and Spain have stabilized (at terribly high levels) but not started to improve, and Italy continues to worsen apace.
However, it's worth taking note of this Jim Hamilton piece pointing out that the debt of PIIGS countries is not stabilizing yet, and at least some of the countries will need to default again:
Despite this, central bank guarantees are keeping sovereign interest rates moderate.
Overall, it seems that the European economy has stopped getting worse in 2013, but the "recovery" is so weak and patchy as to barely justify the name. Still, there now seems little prospect of an imminent turn for the worse, and that's a considerable blessing and no doubt explains why the subject has disappeared from the news.
This ongoing weakness in the European economy has material implications for the balance of global oil markets. Here is OECD European oil consumption (according to the EIA) over this period since 2005:
This is out of about 85-91 mbd or so of global liquid fuel production during this period. If Europe had recovered strongly after the great recession, we might conjecture that consumption would be back to 15-16 mbd, instead of being 13-14 mbd. Global prices would probably be noticeably higher in consequence.