Rabobank Group

4-3-2010 | Economic news

The economic situation in the largest eurozone counties has generally stabilized, but the recovery is by no means particularly dynamic and there are worries over its endurance. Those worries pertain particularly to the soft consumption outlook. Growth in and growth differentials between eurozone countries at present are strongly influenced by the volatile swings in the inventory cycles.

Germany – Economic recovery is not robust yet!
Growth in 09Q4 stagnated amid weak domes¬tic demand and rapid destocking by firms. But the expected swing in the inventory cycle together with robust external demand can result in solid growth figures in H1 2010. There are a number of downside risks, however. Consumers might significantly tighten their belts given the severe head¬winds they will face while the harsh winter might take its toll on industrial production.

France – Q4 closed 2009 on an upbeat note. But now what?
With a q-o-q growth rate of 0,6% in 09Q4 France ended the year with a splash. The turning of the inventory cycle played a large role with a contribution of 0,9%-points. The positive sentiment did not survive long in 2010, however. Worries about austerity measures and growing unemployment are bound to reduce consumers’ willingness to spend.

Italy – Recovery falters, renewed recession a possibility
The Italian economic recovery has so far lasted only a single quarter. In 09Q4 the economy relapsed into contraction, by 0.2% q-o-q. A return to growth and resumption of recovery in 10Q1 is not an established fact. A reduced pace of de-stocking –inventory levels are now assessed at all-time lows– is the most likely candidate to push growth back in black in 10Q1.

Spain – Bad news loses monopoly
The Spanish economy remained stuck in recession in the fourth quarter of 2009. Exports and private consumption made a positive contribution to economic growth, but an unexpected sharp drop in government consumption hindered the step from contraction to growth. Unemployment fell in January and economic sentiment rose further in February. The recession might be over for now, but is by no means replaced with sustained recovery.

The Netherlands – Modest recovery continues
During the fourth quarter of 2009 the Dutch economy grew by 0.3% compared to the previous quarter. Although growth was modest, it confirms the upward trend of the previous quarter’s data. Exports remain the main driving force behind the economic recovery given that the outlook for spending by companies and consumers still is far from rosy. Unmitigated optimism is therefore uncalled for.

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