After a busy economic week in Europe as the BoE and ECB interest rate decisions were announced, in which we saw both central banks leave them steady at a historic low of 0.50% and 1.00% respectively. This week, we see the major highlights are on the euro zone's monthly report next to fourth quarter GDP reading, and from the UK the BoE will release the quarterly inflation report.
In the euro zone, President of the ECB Jean-Claude Trichet is already suggesting that the bank is to start planning further exit strategies in March, as officials will discuss the improvements that took place in the nation alongside the end of the 6-month loan facility.
Starting off, the European Central Bank will release the Monthly Bulletin containing a detailed analysis of the latest economic progress and the risks to price stability, yet this report is not as detailed as those on quarter basis.
Economic data lately, have been supporting the fact that the worst of this economic recession is over especially as in the third quarter, the euro zone grew by 0.4% while this week, the GDP fourth quarter advanced reading will be released showing that growth will stagnate.
The improvement that is taking place in the euro zone is a result of the ECB using 60 billion euro dominated bonds to help the 16-nation region step to its knees and away from recession. This program has been successful as we saw that dominate sectors are expanding while confidence levels rose. Also we saw the severe decline in prices have eased while Trichet believes that inflation remains anchored in the medium term.
The European Commission expects that the euro zone will expand 0.8% this year and 1.2% next year, according to the last estimates provided by the ECB in December.
Now turning to the United Kingdom, the BoE is releasing the February Inflation Report, which will help us better comprehend the current economic conditions and how the APF has helped the nation show slight signs of recovery. The report will also reveal the outlook for economic growth and inflation, as last week the BoE paused the program while leaving the door open in case the economy still needs extra measures to step out of recession.
Also more from the UK this week, are December trade figures, which expectations show that the trade deficit will narrow supported by the weaker pound as it becomes cheaper for overseas traders to purchase goods. The higher exports will further boost the UK's GDP levels of course next to the key sectors expanding, which meant that production output is progressing.
For more evidence to support the fact that the manufacturing and services sector representing 15% and 75% of GDP are pulling through the recession, we see that this week, the industrial and manufacturing production for the year ending in December will progress, although they remain in the negative region pressured from the ongoing global recession.
To conclude the economic scenario in Europe, we see that the euro zone is revealing more signs everyday that hint they are stepping out of recession while in the UK they are struggling to shake off the recession while in both regions; they are dealing with a fragile labor sector and instability in the banking system. In the euro zone, the budget deficits are a major woe which continues to undermining growth prospects.
