Business confidence in Germany Declines on Intense Snow

Business confidence in Germany in February dropped for first time in 11 months.

The decline is explained by extremely cold weather this winter which resulted into closing of unfinished constructions constraining work in most construction sites. The index, which measures business climate in Germany, Europe`s first economy, in January slid to 95.2 from 95.8 in December. The lowest point in last 26 years was marked in March 2009 when German business confidence index dropped to 82.2.

After an economic pickup in the third quarter recovery in the first Europe`s economy halted in the fourth quarter of 2009 as unexpected snow and extremely low temperatures dampened construction making the companies stop hiring new employees. Nevertheless, increase in global demand encouraged German exporters who managed to trim its losses.

According to the Bundesbank, Germany`s central bank, the economy is expected to grow at 1.6 percent pace compared to 5 percent slump in 2009.

Yesterday die Spiegel reported that the Minister of Finance of Germany prepared a plan of bail out to Greece of about $20 bln. Germany in cooperation with other EU countries is expected to help Greece suffering from budget crisis.

Solution for Greece`s Budget Deficit Is Found

Today European leaders came to the agreement aiming to help resolve the problem of 13% budget deficit in Greece.

According to this agreement, Greek government will receive lending facilities. Thus, the financial crisis in this country may be avoided. The EU leaders pledged to take “determined” action to struggle against the worst crisis in 11-year history of Euro. Greece's attempts to cope with its exploding debt has added to worries that the country might default. The EU President Herman Van Rompuy said: “We fully support the efforts of the Greek government and their commitment to do whatever is necessary including adopting additional measures.”

In order to safeguard financial stability in the region the EU leaders pledged to bail out Greek economy as here the problem of one euro-zone country becomes the problem of all. This step is considered historic in last ten years since the single currency was introduced. Euro zone leaders had hoped to keep Greece off the summit agenda. But they had to include it as worsening market conditions showed that Athens's problems could spill over to other EU countries.

Next week, the Ministers of finance of the EU countries will gather to discuss issues over Spain and Portugal also suffering from high budget deficit and increasing unemployment.

The agenda including all major economic events can be found at Economic Calendar Page.

Planned Layoffs Drop to 2-Year Minimum

The official data on planned job cuts in the USA were announced today. The December figures show the US economic activity began rising.

In December employers declared 45,094 planned layoffs, the lowest reading since December 2007. This figure is 73 percent lower than the reading in December 2008 with its 166,348 layoffs, the official research showed. In the second half of 2009 the employers fired their workers 56 percent lower than in the first half. After the second quarter of 2009 the US economy saw signs of recovery and the situation on the job market improved.

National US unemployment, the key indiator showing the sate of economy, decreased to a seasonally adjusted 10% in November from the 26-year high of 10.2 percent in October. The rate had increased for 12 out of the previous 13 months before November 2009. Analysts expect the national rate to edge up to 10.1% when the US Labor Department releases its December jobs report this Friday.

US Unemployment Declines to 10%

According to the US Bureau of Labor Statistics, the US jobless rate dropped to 10 percent level in November from 10.2 percent in October. These figures show that the US job market is getting out recession, however, significant obstacles remain. In November employers fired 11,000 workers, far below prior expectations of 150,000, Bureau of Labor`s figures show. The strong improvement surprised analysts, mentioning that the US job market still remains weak, however, moves into right direction.

The highest degree of employed people was seen in business and professional services adding 86.000 jobs. Employment in healthcare and education showed signs of recovery, while construction and manufacturing industry delivered 27.000 and 41.000 monthly job losses correspondently. However, there are still over 15 mln people unemployed in the USA, this number is twice bigger than before the recession started in 2007.

President Barack Obama called this data “good news” and promised to continue carrying out his programs aiming at hiring people.

After the official report the US Dollar spectacularly appreciated versus other Forex currencies.

Euro-zone Economic Confidence Shows Recovery on the Way

Euro-zone economic confidence in November showed signs of improvement delivering signal that the region is getting on rail of recovery.

Indicator of consumer sentiment rose to 88.8, European Commission figure say. This figures appear to be higher than expected level of 88. Manufacturing and services rose for a fourth straight month spurring up the degree of business activity in 16-nation region.
A better than expected result is mainly driven by ECB`s stimulus programs and its policy of close to zero rates. High unemployment rate and rising Euro are the sources of concern, threatening to slower recovery.

The business activity indicator inclined to -1.56 from revised -1.79 which is higher than the estimated -1.65. European consumer confidence in November rose to -17 better than prior -18 matching expectations. The news affected Forex market investors encouraging them to buy Euros.

Earlier the ECB Chairman Jean-Claude Trichet expressed the idea that the Euro-zone`s recovery will continue growing steadily in 2010. The bank made a decision to buy covered bonds and gave billions of euros to markets within the frames of its emergency programs.

UK Inflation Climbs in October

The inflation rate in the UK climbed higher than experts predicted showing the first rise in last eight months. UK consumer prices rose 1.5 percent compared to 1.1 last months. The experts predicted 1.4 percent rise.

The reasons of such reading are and air fare costs and fuel prices as fuel producers shift their trading terms. However, between September and October the cost of fuel dropped by 0.7 percent.

Prices for second-hand cars, caused by a shortage of stock, rose at the fastest pace pushing up inflation in October, the figures released by the Office for National Statistics showed today. Climbing prices of recorders, games and toys also contributed to inflation.

According to the Bank of England`s growth and inflation forecasts released November, 11, the inflation will not reach 2 percent level until 2012. As the UK economy recovers there are some risks of rise in consumer prices, that is why the Bank of England ties not to withdraw stimulus measures too early and sticks to its low lending rate policy.

Economists Predict Us Jobless Rate to Hit 13% Level

The unemployment rate may shortly rise to 13 percent level, the highest level since World War II, David Rosenberg, an economist at Gluskin Sheff & Associates Inc.

This prediction was made after the US Department of Labor released negative unemployment figures showing that the US jobless rate, one of the most important economic indicators, unexpectedly hit the level of 10.2 percent. David Rosenberg gave an interview to Bloomberg news agency. In this interview he said that “this is going to be the mother of all jobless recoveries.” He also noted: “At the beginning of the year, who was calling for unemployment to go up to 10 percent?”

In the near future joblessness rate has all the prerequisites to reach the 13 percent level. The rate of 13 percent would be the highest since monthly records started in January 1948. Previously postwar maximum was 10.8 percent in 1982. During the Great Depression in 1933 unemployment jumped nearly to 25 percent.

Besides, the under-employment rate, including part-time workers who would prefer a full-time post, and people who would like to work and have given up looking, hit 17.5 percent last month, the maximum reading since records started in 1994.