International Economic Outlook

INTERNATIONAL ECONOMIC OUTLOOK By Evangelos Otto Simos, Ph.D. EXPORT-LED RECOVERY IN EUROPE UNDER A FALLING EURO I. Global Assessment and Outlook Recent monthly indicators and quarterly national accounts confirm that several industrial countries, especially the major European economies experienced a “soft patch” at the end of 2004 and in the first quarter of this year. In the last quarter of 2004, the combined output of the economies in the Euro Area edged up by an annual rate of 0.8 from the third quarter. Although the overall growth rate in the Euro Area grew at an annual rate of 2 percent in the first quarter of 2005, Italy’s output declined for a second quarter in a row and the Netherlands registered a negative growth rate after zero growth in the previous quarter; output growth in France - the second largest economy in the Euro Area - slowed down substantially to an annual rate of 0.8 percent from 2.8 percent in the previous quarter, while Belgium recorded zero economic growth. Monthly indicators also point out to the Euro Area soft patch. Consumer confidence dropped sharply in May to its lowest level in twelve months. Industrial sentiment declined in May for the sixth ...