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​In the headlines: 
  • Eurozone: Weak data but signs of stabilisation
  • US: Spending cuts and other uncertainties
  • Switzerland: Robust 2012 GDP growth
  • Venezuela: President’s death


Figure of the week:


Eurozone 2012 Q4 Q/Q GDP contraction

Eurozone: Weak data but signs of stabilisation

The second estimate of EZ Q4 2012 GDP confirms the economic contraction of -0.6% q/q in the flash estimates. Investment was the main driver (-1.1% q/q) and private consumption also continued to contract (-0.4%). On the supply side, the main drag was manufacturing (-1.7% q/q), followed by construction (-0.8%). All of the four largest economies contracted, with -0.9% q/q in Italy, -0.8% in Spain, -0.6% in Germany and -0.3% in France. The latest data suggest a subdued Q1 2013, with unemployment still on an upward trend (a new record high 11.9% in January from 11.8% in the previous month). However, business confidence surveys signal some stabilisation in the coming months. Meanwhile, this week’s Eurogroup decisions include a likely adjustment in the maturities of the EFSF and EFSM loans to Portugal and Ireland to facilitate their return to the markets this year, disbursement of the next tranche of Greek aid (EUR2.8 billion) reflecting progress with reform implementation, further discussion on the recapitalisation of banks by the ESM, which should allow a final decision next June, and discussions with the new Cypriot government regarding financial assistance.

US: Spending cuts and other uncertainties

Automatic spending cuts of USD85 billion (<3% of the federal budget) came into effect on 1 March, but expect negotiations to reverse them to continue. Upcoming dates contribute even more uncertainty, including 27 March when Congress must decide to keep funding government operations or not and mid-May when the debt ceiling may need to be raised again. Meanwhile, Q4 2012 GDP was revised up to +0.1% q/q annualised, with only the consumer contributing significantly at +2.2%, still markedly below average. Personal income increased significantly in December 2012, by +2.6% mo/mo, partly to avoid new taxes, and then fell back by even more in January, -3.6%, to a weak annual real rate of 1.8%. Industry is doing better than the consumer as both the manufacturing and non-manufacturing ISM indices increased, to 54.2 and 56.0, respectively, and indicate expansion.

Switzerland: Robust 2012 GDP growth

In the final quarter of last year, the economy proved to be resilient and, indeed, developed slightly better than expected during that period. GDP increased by +0.2% q/q and this followed a similarly strong performance in Q3 (+0.6%). In full year 2012, GDP increased by +1%. Growth in Q4 was driven by ongoing strength in both private consumption (+1.1%) and public consumption (+1.1%), which was accompanied by a more moderate contribution from investment (+0.5%), although the latter followed two consecutive quarters of contraction. Net exports continued to provide a negative contribution to overall growth, of -0.3pps, reflecting difficult global conditions. There was also a reduction in inventories, which had a marked impact equivalent to -1.1pps on overall growth.

Venezuela: President’s death

President Hugo Chavez died yesterday. He had been seriously ill with cancer for some time, although he had won another term in office by a comfortable margin in elections held last October. Vice-president Nicolas Maduro, Chavez’ chosen successor, will assume temporary office until fresh elections are called, according to initial statements. There are likely to be manoeuvrings within the ruling party but, at this point, Maduro appears favourite to win an election and then try to continue the broad thrust of Chavez’ policies. Nonetheless, there are considerable challenges. It will be difficult for Maduro (or anyone) to replace the charismatic leadership of Chavez, which may reduce his popular appeal. It also remains to be seen if Maduro can maintain control of the forces that backed Chavez (including the military) and whether the opposition can mount a united campaign. The coming months will be highly uncertain and the transition could unfold in unpredictable ways.



  • Mediterranean, Africa & Middle East – Kenya: Elections
  • Americas – Brazil: Modest Q4 2012 upturn
  • Asia-Pacific – India: Budget and outlook
  • Europe – Slovenia: Political & economic crisis