Europe Ahead: UK and German Industrial Production to improve in July

UK and Germany will release industrial production reports for the month of July amid concerns that global recovery is stalling. The recent data from the United Kingdom has been raising concerns that the pace of growth is slowing.

The British economy grew 1.2% in the second quarter following 0.3% expansion in the first quarter, but data released starting from June is providing clues that growth pace will ease in the second half of the year.

But today expectations are referring that industrial production will advance to 0.5% in July from -0.4%, while the annual reading might rise by 2.0% from 1.3%. Manufacturing production will linger at 0.3% on the month and edge up to 4.9% from 4.1% on the year, according to median estimates.

UK’s PMI manufacturing dropped to 54.3 in August compared with the revised 56.9. Mortgage approvals slipped last week while the latest inflation report showed that the BoE has lowered growth forecasts for 2010 to 3.0% instead of 3.6% estimated previously.

What adds to worries is the planned spending cut announced on June 22 to trim the deficit that reached 11.1% of 2009 GDP.

On the other hand, the economic conditions in Germany, the largest in the euro zone, seem to be better than the United Kingdom after the better-than-estimated growth of 2.2% recorded in the three months ending June.

Today's data is expected to show that industrial production will incline to 1.0% in July from -0.6% in June, while the annual reading will rise to 12.5% from 10.9%.

The Bundesbank raised its growth forecasts for the current year to 3.0% instead of 1.9% estimated in June after the better-than-expected growth figures recorded in the second quarter, compared with last year's contraction of 4.7%.

However, the Bundesbank added that the pace of progress is likely to continue in the second six months of this year but with normal rate, while budget deficit is estimated to reach 4.0% next year and 3.0% in 2012.

In general, the euro zone raised its growth estimates for this year and next to 1.6% from 1.0% and 2012 to 1.4% from 1.2% respectively, but still many countries in the region are suffering to trim their budget slippages which may affect growth in the coming period.