An economy is said to be in a recession if it posts negative growth for two straight quarters. The euro zone GDP has been contracting for four straight quarters. Heck, we haven’t seen positive growth figures from the region since Q3 2011. It most definitely fits the description of an economy being in a recession!
But I would have you know, the euro zone has been showing signs of life recently. In fact, some analysts believe that the region has already bottomed out and its recession has come to an end.
Among those who feel optimistic is Credit Suisse. The world-renowned think-tank called the end of the recession at the start of the month. This was following the better-than-expected PMI reports that we saw from the region.
If you remember, I pointed out in my previous Piponomics article that the euro zone composite PMI printed above 50.0, indicating growth for the first time since 2012. It came in at 50.4 for July versus the 48.7 reading we saw for June.
But what many find so awesome about the recent numbers from the euro zone is that they show broad-based improvements. That’s right – it wasn’t just Germany and France that saw encouraging developments. Apparently, peripheral countries have also been experiencing a pick-up in business activity.
Heck, even two of the region’s most problematic members, Spain and Greece, have been showing promising signs.
If you recall, Greece sparked the European debt crisis back in 2009 as its ballooning debt got too hot for it to handle. Meanwhile, just last year, Spain’s rising borrowing costs pushed the ECB to start its unlimited bond-buying program.
But studies show that these two countries may finally be getting out of their ruts. First, businesses and consumers in both countries are finally feeling more confident about the future. Also, both countries saw improvements in their manufacturing sectors in June and July.
Progress in these countries may be slow, but it’s definitely a start. Remember, you’ve got to walk before you run!
No doubt, the euro zone has suffered a lot the past few years, and the truth is it will most likely continue to encounter difficulties. But recent reports have been hinting at a light at the end of the tunnel.
Sure, it’s still too early to tell whether the euro zone recession has come to an end with just a month’s worth of data, but it’s also hard to deny that the region is off to a promising start this quarter. Many have already made their fearless forecasts and predicted Q3 2013 to be the quarter where we finally see a positive growth figure for the euro zone again.
What do you think?