The Euro Area Narrowed Contraction was Confirmed Today

Daily Forex Fundamentals | Written by ecPulse.com | Sep 02 09 13:23 GMT |

Day after day, the European outlook brightens significantly boosted by the ongoing improvements in fundamentals, as activity is being revived once again from the protracted measures taken by policy makers to end the drastic downturn seen previously. The taken measures came to push two of the sixteen nations into an unexpected expansion, where France and Germany faced 0.3% expansion. However, the narrowed contraction seen in the second three months of the year records the fifth consecutive contraction. The gained back activity in the euro area was one of the reasons to narrow the pace of contractions in the second quarter, where the national governments of Germany and France introduced new measures in order to bolster the economy and stop the bleeding of unemployment rates. As we all know, Germany devoted some of it’s the money to support the car industry which was teetering on the brink of fading away, therefore a total of 2500 euros was givens to individuals in order to scarp their cars and purchase new ones. However, what really grabbed our attention today was the improvements seen to the Consumer spending where it added 0.2% in the second quarter, whereas the ongoing bailout finally came to create a sense of stability and encourage households to consider spending at the time prices plummet heavily into the negative levels giving the chance for households to use the increased purchasing power of the euro. The surprising thing seen today was the improvement seen in the export levels, as it contributed in narrowing the contractions seen previously. We can take those reading positively because the main reason behind the stalled activity in the sixteen nations was the drastic fall in export levels seen since the dilemma started, where Germany, the European economy which depends heavily on the levels of exports to external rivals faced a stalled demand, along with a weakened new orders to the manufacturing sector. Okay, projections in markets project further contractions this year, where according to the IMF a 4.8% contraction will be seen this year, as it would extend further in 2010 to -0.3%. However, personally I believe if improvements are taking place that rapid then economies will be heading toward an expansion faster than markets already projected, therefore an expansion would be taking place in the before the end of the 2010, but the threat of surging unemployment rates along with the threats of easing spending would stand as an obstacle in the path of improvements. Nevertheless, with the extensive actions taken by the European Central Bank and National governments the euro area will remain under prolonged stresses from the falling consumer prices, as it currently struggling in the negative levels. Yet we can’t really call a deflation in the sixteen nations because according the seen CPI readings we’ve seen it fall down to -0.7% but as seen in the last flash estimate it narrowed to -0.2% as a positive levels might take place in the upcoming periods. The sixteen nations are finally headed in the safe zone, because the pace of contractions had narrowed significantly given out some hopes of an expansion in the upcoming year, yet policy makers have to take actions in order to end the bleeding in some sectors. Ecpulse disclaimer: The content of ecPulse.com and any page in the website contain information for investors/traders and is not a recommendation to buy or sell currencies, stocks, gold, silver & energies, nor an offer to buy or sell currencies, stocks, gold, silver & energies. The information provided reflects the writers' opinions that deemed reliable but is not guaranteed as to accuracy or completeness. ecPulse is not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trades currencies, stocks, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, stocks gold, silver &energies presented should be considered speculative with a high degree of volatility and risk