Tepid growth (in the U.S.) is still better than no growth (in the EuroZone) in today’s economic reports
It was a tale of two economies today.
Data showed the U.S. economy growing tepidly.
Which was still a quite a bit better than data from Europe that showed the EuroZone headed toward recession.
In the United States initial claims for unemployment dropped to 351,000 for the week ended February 25—but the numbers showed a drop only because the prior week’s initial claims figures were revised upward to 353,000 from 351,000. (Economists had projected initial claims of 355,000 for the week.) Personal spending climbed just 0.2% in January, well below the 0.4% forecast by economists surveyed by Briefing.com. Income grew by 0.3%, less than the 0.4% projected by economists. And the Institute for Supply Management manufacturing index dropped to 52.4 in February from 54.1. The index stayed above the 50 level that separates growth from contraction but a move down to 52.4 is a move in the wrong direction.
But the U.S. news was a stroll on the beach compared to the news from the EuroZone. Inflation in the European Union climbed to 2.7% in February from 2.6% in January. Unemployment in the EuroZone hit 10.7% in January, the highest since the start of the euro in 1999. The EuroZone purchasing managers index did edge higher to 49.0 in February from 48.8 in January but a reading below 50 still pointed to a contracting economy. The German purchasing managers index for manufacturing remained above 50 at 50.2 in February but that marked a move lower (from 51.0) for the EuroZone’s strongest economy. The French purchasing managers index came in at 50, down from 50.2 in January and in Italy it remained below 50 at 47.8.
European stocks rose on the day on news of progress in finalizing the new Greek rescue package and on well-subscribed Spanish bond auctions. But the economies of the EuroZone continue to show signs of slowing. At some point that economic fact becomes a problem for countries relying on austerity to meet their budget deficit targets.
That “problem” has already shown up in the European summit that began today with Spain asking for flexibility on meeting its budget deficit targets for 2011 and 2012.
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Anyone who has owned Chicago Bridge and Iron (CBI) – a Dutch company – for the past couple of years might be excused for not knowing there were any problems at all in Europe.
Hopefully my investment in Banco Santander (STD) will someday work out as well. In the meantime the substantial dividends go into purchsing additional stock.