01/12/2011
By Ilonka Oudenampsen
Standard & Poor’s has cut its 2012 real GDP growth forecast for several European countries and is expecting another recession in Europe.
In its report European Economic Outlook: Back In Recession, the rating agency said high frequency indicators in the past month continue to depict Europe's darkening economic landscape.
S&P has cut its 2012 real GDP growth forecast for France from 0.8% to 0.5%, for Germany from 1% to 0.8%, and for Italy from 0.2% to 0.1%. "We now expect a mild recession in first-half 2012 in the eurozone, ahead of a modest pick up in the second part of the year," said Jean-Michel Six, Standard & Poor’s chief economist in Europe. "But we stress that the downside risk remains very significant. We estimate that our baseline forecast of a mild recession has a 60% probability, while a more severe recession has a 40% probability."
The composite Purchasing Managers Index for the eurozone, an indicator of manufacturing trends, fell from 49.9 points in September to 47.2 points in October, the biggest drop since July 2009. At the same time, new orders in eurozone manufacturing fell for the third month in a row, while export orders lost ground for the fifth consecutive month. The contraction in activity has also spread to services, with the eurozone services PMI in October at its lowest since July 2009.
"Europe's approaching recession first took hold in Spain, Portugal, and Greece, and the economic woes are now spilling over into the eurozone's core of France and Germany," Six said.
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