Thursday, August 13, 2009

Economic News, Good And Bad

(Our economy at sea.) Image credit: Found here.

It's been a mixed day of economic news - good for Europe, and not so good for us.

In Europe, France and Germany have, at least temporarily, climbed out of the recession:

The French and German economies both grew by 0.3% between April and June, bringing to an end year-long recessions in Europe's largest economies.

Stronger exports and consumer spending, as well as government stimulus packages, contributed to the growth.

France and Germany Exit Recession

As with all such news, there are all sorts of folks to explain it all. Many seem to believe that this is, to put it the way one observer put it, a very "fragile" recovery:

But there are concerns that the banking system across Europe is still fragile and that the growth is reliant on government stimulus spending that will eventually have to come to an end.

BBC Europe business reporter Mark Sanders said that although the surprise news was highly welcome for those that have been suffering, there were questions about how strong and credible the economic recovery is.

"To draw a medical analogy, we've got the patient waking from a coma and talking to medical staff," he said. "They're not necessarily going to be running any marathons soon."

France and Germany Exit Recession

To continue with a medical analogy, if you want the patient to recover, stimulus spending should be directed toward making the patient stronger, not making him more comfortable. I don't know if France and Germany managed that, but the U.S. was only modestly successful at maintaining those priorities.

Still, it's good news. Stronger economies in Europe should help exports here, although not by a great deal.

Which brings us to the bad news:

US retail sales unexpectedly fell in July, following two months of rises, as job security fears appear to have once again knocked consumer spending.

Sales declined 0.1% last month, following a revised 0.8% increase in June, the official figures from the Commerce Department showed.

US Retail Sales In Surprise Fall

No one should be surprised at this. Long term prospects for employment here are still lousy. The banking crisis has sucked up most of the available capital into a recovery strategy that's only served to help the people who run financial institutions, and the stimulus package was pitifully small relative to what it needed to be.

Just the other day, Democrats were trumpeting how they'd fixed the economy. My guess is that if you're shocked by this development, you were one of the few silly enough to believe them.

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