Current outlook of European economy is not encouraging

Current outlook of European economy is not encouraging

The current economic outlook in Europe remains somewhat weak and it appears that the main hope for any significant recovery is closely related to the external influences, particularly the economy of the US. On the other hand, even these fragile hopes are all bound to the position of the Euro, as a further appreciation of the currency will put the export earnings under threat. GDP forecast has been revised to 0.6 for 2003 and unemployment is still continuing to grow, even though at a slow pace. The course of the household and business confidence is also low, and the investment spending is declining for the 8th consecutive quarter in the region. These factors can be taken as other key indicators of the European economy, not giving very promising signals for a quick recovery. Moreover, the analysts confirm that Germany, Italy and the Netherlands are technically in recession. Fiscal deficits in France and Germany are well above the 3% of GDP permitted by the Growth & Stability Pact. Steel consuming sectors index contracted more than anticipated this year and only a modest recovery is expected for the rest of the year. However, the poor financial results of companies and difficult business conditions put even such small recovery under risk. In the meantime the construction sector looks positive supported by the low interest rates and firm house prices. The tubes sector as well as the construction sector is damaged by the low investment levels and fall in industrial production. Production of industrial vehicles are high and the exports strong in the automotive sector, and the weak domestic sales of the third quarter are expected to strengthen in the fourth quarter due to new models coming up. The real consumption of steel is estimated to have fallen by 1.2% for the first three quarters of the year, according to Eurofer, compared to last year levels.