The International Monetary Fund last month cut its global growth projections, while the U.S. Treasury Department’s top international official, Lael Brainard, said Europe faces the risk of prolonged economic stagnation unless policy makers encourage domestic demand. Euro-area unemployment has held at a record since March and almost a quarter of young people across the bloc are without jobs. The ECB forecasts that the euro economy will shrink 0.6% this year.
“The growth rates we’re currently seeing are still far too low and we’re seeing an increasing gap between financial and political hope on the one side and economic reality on the other,” Stephen King, U.K.-based chief global economist at HSBC Holdings Plc, told Bloomberg Television on Aug. 12. “The problem is the gap between the growth that’s being delivered and the growth that’s required to make the fiscal numbers add up in the medium term.”
Elsewhere in the region today, Britain’s unemployment rate remained at 7.8% in the latest quarter amid signs the labor market is improving. U.K. unemployment claims fell twice as much as predicted in July.
Bank of England Governor Mark Carney has made unemployment a focal point of monetary policy by pledging for the first time to refrain from raising interest rates until joblessness falls to 7%. The Monetary Policy Committee voted 8-1 to link the outlook for its benchmark interest rate to unemployment, according to the minutes of its Aug. 1 meeting.
While Europe’s recovery inches forward, conditions in major export markets such as the U.S. and China are improving.
In China, July industrial output rose more than economists expected after a larger-than-forecast rebound in exports eased concern that a credit squeeze in the world’s second-biggest economy would curb growth sharply. Elsewhere in Asia today, India’s wholesale price index rose a faster-than-forecast 5.79% in July and retail sales in New Zealand advanced 1.7% in the second quarter from three months earlier.