It was just announced last week that Italy was in its third recession in the past five years. It has been noted that GDP in Italy in the second quarter was below the level achieved in 2000 making it the worst performer in Europe since the European monetary union was formed.
The only component of GDP that had been growing in Italy recently was the export sector and in the second quarter the growth in exports actually fell. This, of course, reflects upon the fact that businesses in Italy are not very competitive in world markets.
Inflation is quite low…and declining…making debt burdens. And Italy has a lot of them…that much worse.
But this is not all.
Disinflation continues in all of Europe and is expected to continue the rest of the year. Data on the GDP of the eurozone for the second quarter, to be released tomorrow, are expected to show a drop to 0.1 percent from 0.2 percent in the first quarter.
And, to add to the economic weakness felt, even earlier in the year, the situation relating to Russia and the events in the Ukraine continue to impact the whole European continent. The rising battles over sanctions have only added to the pessimism that has grown in member countries.
Right now, Spain seems to be the country that is coming along the best, but its performance is not that spectacular.
The other nations, including Germany, the country that is economically the most sound, are struggling. The numbers on the German economy to be released this week are expected to slow little or no growth in the second quarter. These figures are coming out at the same time that confidence seems to be falling.
And, there is great concern that the economic sanctions against the Russians will hit German businesses particularly hard. German Chancellor Angela Merkel seems firmly behind the European sanctions in spite of what it might do to her country's economy.
By the way, economic growth in the Russian economy declined in the most recent quarter.
In addition, we find out that deflation in Portugal actually increased in July as prices dropped by 0.7 percent. Although the Portuguese economy is increasing modestly and consumer confidence seemed to be rising, the demand for goods, especially in the retail sector, continues to be weak.
In France, the economy did not grow at all in the first quarter and little or no growth is expected in the second quarter. Optimists still are saying that, overall in 2014, the French economy will grow by about 1.0 percent. For 2015, growth may even be weaker than this.
Around the eurozone, the picture is not too rosy either. In Sweden, the Swedes are battling to keep their heads above water. In the second quarter of 2014 the economy grew by 0.2 percent, up from a negative 0.1 percent in the first quarter.
In Norway, the economy was up 0.3 percent in the second quarter, an increase from a negative 0.2 percent in the first quarter. In Finland, the word is that the Fins are experiencing a double recession. Here GDP dropped 0.4 percent in the second quarter, which was worse than the 0.2 percent drop in the first quarter. But the Fins have not had a quarter of positive growth since the third quarter of 2012.
In England, the future looks a little more optimistic. The Bank of England just announced new projections for economic growth in 2014 and 2015. In 2014, the BOE expects the economy to grow by 3.5 percent. In 2015, it expects the growth rate to drop to 2.9 percent. Still, these projections show a lot more optimism to them than in just any place else in Europe or America.
Over the past four quarter, England has grown by 3.2 percent.
Bottom line, the situation in Europe seems to be getting worse.
The pressure is on Mario Draghi, the President of the European Central Bank, to create a program of quantitative easy for the European economy. This, they argue, would stimulate the economy and also cause the value of the Euro to decline which will also help.
But the pressure on the ECB continues.
To some people, the United States should be very worried about this situation and actually help Europe by acting in a way that would help break the barrier to a lower Euro. In the two articles just cited, I have suggested that just given the current situation, the value of the Euro should continue to decline… even to a level of $1.30 per Euro. As I write, the price is $1.3378.
I believe that the United States should support a strong dollar, but I don't think that the government should attempt to achieve this just based on the current situation in Europe. The goal of a strong dollar should be one of the major policy goals of the United States... all the time.
The problem I'm concerned about, I believe that all Americans should be concerned about, is that the eurozone might go back into a recession.
The Vice-Chairman of the Board of Governors of the Federal Reserve System, Stanley Fischer, gave a speech in Sweden on August 11. He stated that there are three "cyclical" factors that the United States should be worried about in trying to understand the period of slow growth it is going through. One of these factors is "the negative impact from the growth slowdown abroad - particularly in Europe."
If the "growth slowdown abroad" accelerates, then that will just tend to reduce the slow growth already taking place in the United States.
And, this conclusion doesn't even consider the "not-so-good" news coming out of Japan and the slower growth being felt in some of the larger emerging nations.
Finally, there is China. China's economic growth in the second quarter was 7.5 percent, year-over-year. This is slower than has been achieved in recent years but it looks pretty darn good considering what else is going on in the world.
However, a continued slowdown in Chinese growth would impact almost every other nation mentioned above.
More than anything else, maybe we should be concerned about how Europe is growing… or, how "the world" is growing… and not just on individual figures from our own economy. The shock to the economic recovery in the United States might be right before our eyes... although it is not in the American data. This is something we need to watch closely.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.