Continuing my look at recent central bank action that occurred during my absence, we have the EU dropping its rate from 75bp to 50bp. The reason is simple: The region is still in a recession, with the numbers being reported getting worse. Let's turn to the recent data to get a better idea for the deteriorating fundamentals, starting with the still worsening employment situation:
The euro area (EA17) seasonally-adjusted unemployment rate was 12.1% in March 2013, up from 12.0% in February. The EU27 unemployment rate was 10.9%, stable compared with February. In both zones, rates have risen markedly compared with March 2012, when they were 11.0% and 10.3%, respectively. These figures are published by Eurostat, the statistical office of the European Union.
Here's a chart of the data:
Starting in the first quarter of 2012, we see the unemployment rate start to tick up consistently. Also, notice how there has been absolutely no pause in the rise. This alone would be of concern to any central bank. But the news continues to get worse.
The EU's manufacturing sector's problems are worsening. From the latest Markit manufacturing report:
- Final eurozone Manufacturing PMI at four month low of 46.7 (flash: 46.5)
- German output contracts for first time in 2013, joining ongoing downturns elsewhere
- Job losses recorded across the currency union, as March recoveries in Germany and Austria prove short-lived
Here's a chart of the the Markit data:
All the major economies are now below 50. Some have been at that level for over a year, indicating a prolonged contraction.
Finally, retail sales contracted in the latest report:
In March 2013 compared with February 2013, the volume of retail trade fell by 0.1% in the euro area (EA17) and by 0.2% in the EU27, according to estimates from Eurostat, the statistical office of the European Union. In February retail trade decreased by 0.2% in the euro area, but rose by 0.1% in the EU27.
And a chart of the data shows the deteriorating condition of the sector:
Simply put, the EU remains mired in recession with little to no indication of getting out anytime soon.