Recovery gaining ground in Europe

ECONOMIC DATA from across Europe yesterday indicated the continent’s recovery is on track. Italian GDP grew by 0.4 per cent in the second quarter and analysts are predicting similar results when Germany and France release their second quarter GDP figures next Friday.

This comes after a press conference on Thursday where European Central Bank president Jean-Claude Trichet said data for the third quarter was “better than expected”. This prompted Mr Trichet to rule out a double-dip recession.

UK manufacturing output also rose. British factory production was 4.6 per cent higher in June than a year earlier.

Economists said the growth in Italian GDP was on the back of stronger export performance and the country is benefiting from the recovery in Germany, one of its largest export markets.

Domestic sources of demand remained weak. The statistics from Istat, Italy’s state statistics agency, show Italian industrial production in June was 8.1 per cent up over the year.

The outlook in Spain was more mixed – a central bank forecast estimated growth of 0.2 per cent for the second quarter. The bank cautioned, however, that a boost to spending from car buying incentives would only be temporary, and that a sales tax rise in the third quarter encouraged consumers to bring forward purchases.

“As these effects come to an end, the pace of consumption growth could ease, in the context of a decline in disposable income” as wage growth slows and government stimulus measures are wound back, the Bank of Spain said. The Spanish government has agreed to cut public spending from 11.2 per cent in 2009 to just 6 per cent in 2011.

In France, exports rose to their highest levels in two years while the government published figures for the “central government” budget deficit for the first half of 2010 showing a fall of 20.7 per cent on the first half of 2009. The figures, however, are only one of three components of government spending, the others being social security and local government budgets. – (Additional reporting: Financial Times and agencies)