Rabobank Group

5-2-2010 | Economic news

The EMU-5 economies are not experiencing a synchronized recovery path. Germany’s economy is losing steam while Italy’s GDP might even return to negative territory in 09Q4. Spain may not even have exited recession in 09Q4 and the unemployment rate – which was already worryingly high – kept rising even further. On the other side of the spectrum, France is experiencing a strong consumption-led recovery while the Dutch economy is buoyed by world trade, which is growing robustly since H2 2009.

Germany – GDP suffers sharpest post-War contraction in 2009!
Germany’s economy contracted by a record 5.0% y-o-y in 2009. But this does not automatically imply that the economy stalled in 09Q4. Having said that, the disappointing rebound of industrial production in November suggests that growth will be slower in 09Q4 compared to 09Q3 (0.7% q-o-q). What is most disturbing is that consumers continue to become more pessimistic about their future job and income prospects.

France – Cautious optimism
Figures for the last quarter of 2009 have been rather positive up to this point. Economic growth seems to have accelerated somewhat in 09Q4. This bodes well for economic activity in 2010. The big caveat is still the role of the government. Sarkozy’s intentions to tackle the deficits on the trade and government balance are bound to have negative repercussions for the French economy.

Italy – Fragile, but stable
Italy’s financial and economic condition is best characterized as fragile, but stable. Regarding public finances that is a sufficient condition for now to stay out of the direct line of fire of restless financial markets. Regarding economic recovery, a nasty growth setback in 09Q4 is all but certain and even renewed economic contraction is a real possibility.

Spain – Recession continues
The Spanish economy may technically have exited recession in the last quarter of 2009. But with weakening export growth and falling retail sales,  any growth will have been very weak. Even if GDP will grow, the labour market is still mired in recession, leading to higher unemployment and putting an end to the population boom of the past decade.

The Netherlands – External demand is supporting the recovery for now
Although exports remains far below its peak before the crisis, it is the main contributor to economic growth. The government stimulus also helps. The main theme is, however, whether consumers and businesses will give the economy an extra push. For the consumers this is not very likely given that consumer confidence is still negative and unemployment is on the rise.

The Rabobank Economic Research Department follows, analyses and predicts financial and economic developments in the Netherlands and around the world.