After a busy economic week in Europe as the BoE and ECB interest rate decisions were announced, where both central banks left them unchanged 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 the trade balance from UK.
The European Central Bank will release the Monthly Bulletin consisting of a detailed analysis of the latest economic progress and the risks to price stability, yet this report is not as detailed as the reports released based on a quarter basis.
Economic data lately have been mixed, especially as in the fourth quarter, the euro zone growth slowed to 0.1%, but the improvement that is taking place in the euro zone is a result of the ECB applying 60 billion euro dominated bonds to help the 16-nation region prosper accurately alongside central governments applied stimulus measures.
The program so far has been successful, as we saw the key sectors that fuel economic growth improve, which supports gross domestic product growth. Also we saw the severe decline in prices ease while Trichet believes that inflation remains anchored over the medium term.
Now, we turn to the United Kingdom, where we can say that it has started this year showing progress, especially as this past week, sectors continue to expand especially as the service sector representing nearly 75% of the GDP resumed its incline in expansion. This week more positive data is to be released as the trade balance is projected to show that the deficit narrowed to 7000 million pounds from the prior deficit of 7278 million pounds.
The trade balance remains stressed from weak global demand and this is weighing on the UK's GDP, since they were the only nation out of the major economies to fall behind in posting growth. Although there are signs those improvements are occurring, especially as the BoE continued to pause the APF program in March, yet the economical scenario remains fuzzy since they still deal with a swelling budget deficit and high unemployment rates.
Furthermore from the UK this week, industrial production and manufacturing production indexes are to be released, and projections show that the yearly readings will inch closer to recovery and away from misery. It is clear to us that industrial and manufacturing production are rising as the manufacturing sector, as stated earlier continues to expand and this therefore is reflected positively on production.
Governor of the BoE, Mervyn King, stated recently that the United Kingdom is facing a "gradual recovery" from the current recession which is why he left the door open in case more bonds need to be purchased as a way to provide support for the nation to recover fully and skirt deflation.
The focus now in the UK is on the upcoming general elections, in which there are worries regarding what the new government will be able to do to narrow the budget deficit; already there are woes they face a widened deficit which is almost close as Greece's budget deficit.
The major economic woes now in Europe are on the widened budget deficits which are hurting growth levels. The other major concerns in economies are the rallying unemployment rates and shaky banking system which will take some time to improve before we see a full economic recovery in Europe.
