News agency Reuters has reported that labour costs across the euro-zone experienced moderate, if uneven, growth in the second quarter. In the April-June quarter nominal hourly labour costs across the 17 nation currency bloc grew by 1.6 per cent compared to the same period last year. Reuters also revealed that wages increased 1.7 per cent and other labour costs, like social security contributions and taxes, went 1.2 per cent. The news agency has argued that this development shows that the hardest hit of euro-zone economies are making cost adjustments in order to become more competitive.
This apparently good news has been somewhat outweighed by data released today which revealed that in July euro-zone exports declined.
A report released by the Luxembourg based European Union statistics office has stated that June’s gain of 2.4 per cent has been almost wiped out by July’s seasonally adjusted drop of 2 per cent. Imports were hit by a 1.2 per cent decrease whilst the trade surplus tapered from 9.3 billion euro’s to 7.9 billion euro’s.
Compared to June German exports fell by 4.2 per cent in July. The drop in France was much lower (at 0.2 per cent) but Greece’s figure plummeted by 7 per cent.
The global economy continues to cool which has knocked demand for exports produced by European companies. Howard Archer, chief European Economist with IHS Global Insight, summarised his view of the problem stating: ‘Slower global growth is increasingly weighing down on foreign demand. This reinforces the belief that the euro-zone is headed for further gross-domestic-product contraction in the third quarter given that [in the first half] growing exports was one of the few positives.’
This perspective was seconded by an economist with Frankfurt’s Dekabank. Andreas Scheuerle asserted: ‘We’ve seen a difficult economic environment over the past months partly because of a waning global dynamic. The situation will remain difficult in the second half.’
According to the median forecast of 21 economists involved in a survey for Bloomberg news agency the euro-zone economy will contract by 0.2 per cent this quarter and the European Central Bank has already commented that the economy could be reduced by as much as 0.4 this year.
Global demand continues to falter and the main concern for many struggling companies is how to cut costs. In this climate it seems unlikely that the situation will significantly improve for some time to come.
The Pound to Euro exchange rate is currently trading at 1.2368
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