Home > World News > US shows signs of recovery while Europe struggles

US shows signs of recovery while Europe struggles

EVIDENCE THAT the US economy is strengthening while Europe grapples with another recession helped send the euro to a near 16-month low against the dollar yesterday, with more losses likely as long as euro-zone funding concerns continue.

The dollar got a big boost against most major currencies, touching its highest since February against the Swiss franc, after the jobless rate dropped to a three-year low.

Better-than-expected US economic data in recent weeks has highlighted a growing contrast between the recovery in the world’s largest economy and Europe, which is widely believed to be either in, or headed toward, a recession.

Figures out yesterday show euro-zone unemployment surged to a fresh record late last year as economic confidence tumbled to a two-year low and even Germany’s robust industrial sector showed signs of weakness. The Eurostat data pointed to a marked contraction in activity in the final months of 2011.

The latest gloomy economic news indicated the 17-country monetary union was being buffered badly by worries over its debt crisis as well as fiscal austerity measures and slower global growth – with Italy among its worst-hit member states. That could add to fears of a pronounced recession and fuel speculation that the European Central Bank will have to take bolder measures to avert a slump, including by launching its own version of “quantitative easing”.

However, the latest figures were not uniformly bleak, with northern Europe showing signs of modest improvement in December.

With euro zone purchasing managers’ indices earlier this week also suggesting the slowdown had lost some of its intensity, economists said there was a fair chance of the bloc escaping a downturn as severe as in 2009 – assuming the debt crisis did not spin further out of control.

Other figures out yesterday showed that retail sales in the euro zone fell and economic sentiment soured at the end of 2011, pointing to recession in the months ahead, but the first improvement in the business climate in 10 months offered hope that the expected downturn may be mild.

Retail sales for the bloc fell a worse-than-expected 0.8 per cent in November from October. The volume of sales fell by 0.9 per cent in Germany, the euro zone’s top economy, and was down 0.4 per cent in France and 0.7 per cent in Spain.

One bright spot in the data was the improvement in the Commission’s business climate indicator, which increased for the first time in 10 months as factory managers showed optimism about future production plans and export order books.

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