It ended well, especially for Spain, but it was another week of glum economic news across the globe. In the UK, the Governor of the Bank of England admitted his surprise at how quickly things had deteriorated in the last six weeks. Rather worryingly, he wasn’t just talking about the Eurozone but of the worsening situation in emerging markets. That doesn’t bode well for the UK, particularly as it turns out the recession and public finances were worse than feared. But at last there was some good news in the Eurozone – especially for the countries in need of bailout funds. The agreement among EU leaders to allow funding to recapitalise banks without impinging on government finances, was particularly welcome in Spain. The lift may not have been the reason for the sublime performance on the pitch, but it can’t have hurt. This latest agreement isn’t a panacea for all Eurozone problems, but it is a welcome chink of light at the end of the Eurotunnel.
The UK recession was deeper than first thought in Q1, despite strong Government spending. Official estimates confirmed that the UK economy shrank by 0.3% in the first three months of the year. But the decline in Q4 2011 was revised down to -0.4%, from -0.3%q/q. Service sector output rose by 0.2%q/q, but output in the construction sector was just awful. It fell by 4.9%q/q. It turns out households are being squeezed even harder too. They have got used to inflation eroding their after tax income, but now income has fallen in cash terms too, for the second quarter running. No wonder household consumption fell by 0.1%q/q. With this news, we should be grateful that Government spending rose by a hefty 1.9%q/q.
Spanish happy ending?
02 Monday Jul 2012
Posted economy
in