Monday, the week kicked off with some optimism as a key policymaker saw recovery for Europe in 2010 and forecasters said the worst of UK recession was over.


The European Central Bank is considering additional monetary easing measures to support the economy and Europe will see a gradual recovery in 2010 after experiencing exceptionally challenging situations in the current year, the bank's President Jean-Claude Trichet told the business daily Nikkei in an interview. Repeating his remarks made on the latest Governing Council meeting, Trichet said the next rate cut would be very measured. Further, Trichet said the gradual recovery in 2010, as predicted by international public institutions and also the private sector, depends very much on what authorities do to raise confidence.

Separately, the ECB said the current account of the Euro area showed a deficit of EUR 93.6 billion in 2008, around 1% of GDP. In 2007, the current account balance had registered a surplus of EUR 11.1 billion.

Spain's National Institute of Statistics announced that the service sector turnover dropped 20.5% year-over-year in February. After adjusting for calendar effects, the service sector turnover declined 18.7%.

The Statistical Office of the Republic of Slovenia said the output price index rose 0.3% year-over-year in March, slower than the 1.1% rise recorded in the previous month. The agency also reported that industrial turnover dropped a working day adjusted 24% year-on-year in February, faster than a 20.9% fall in January. Official data also showed that the jobless rate stood at 4.3% in the fourth quarter, up from 4.1% in the third quarter.

Malta's National Statistics Office revealed that the retail price index rose 4.26% year-over-year in March, larger than the 4.16% increase in the previous month.

Rest of Europe

The Confederation of British Industry forecast a slow and fragile recovery in the UK with growth resuming only in the spring of 2010. The industry lobby revised down its GDP forecast for 2009 to a 3.9% contraction compared to an earlier estimate of a 3.3% GDP decline, reflecting a harsher sequential decline of 1.8% in the first quarter of 2009. Further, the CBI predicts 0.2% sequential growth in the second quarter of 2010, which would be aided by aggressive monetary policy, a weaker pound, low inflation and the fiscal support measures announced by many nations.

Elsewhere, the Ernst & Young ITEM Club said the UK output would stabilize by the end of this year, with a modest recovery beginning next spring. The think tank expects the British economy to shrink 3.5% in 2009 and 0.1% next year.

UK's Chancellor of Exchequer Alistair Darling is expected to announce a reduction of GBP 15 billion in Whitehall spending in the budget statement on April 22, British media reports said. In his second budget, Darling is also expected to downwardly revise the GDP forecast for the British economy. The Treasury might project an annual contraction in the range of 3% to 3.5%, making it the worst recession since 1945, the BBC reported.

Bank of England policymaker David Blanchflower said it is crass nonsense to say that the magnitude of the financial crisis was unpredictable before the fall of Lehman. According to extracts of a Channel 4 television interview published in two newspapers, the Guardian and the Daily Mail, Blanchflower's disclosures will highlight how slowly the BoE reacted to the credit crisis.

Indicating that confidence in the UK housing market is recovering gradually, house prices rose for the third straight month in April and marked the biggest increase in 14 months. Sellers raised average asking prices by 1.8% month-on-month or GBP 3,996 to GBP 222,077 in April following the 0.9% increase in March, the country's largest property website Rightmove said.

Statistics Estonia announced that the producer price index rose 1.1% year-over-year in March, slower than the 2% increase in the previous month. The agency also reported that the construction price index declined 4.7% year-on-year in the first quarter, representing the first fall since 1995.

Statistics Denmark said the EU harmonized index of consumer prices or HICP increased 1.6% year-over-year in March compared to a 1.7% rise recorded in the previous month.

In other news, rating agency Fitch lowered the outlook on five regional banks in Russia to negative from stable, reflecting deterioration in asset quality and a moderate loss in absorption capacity. The Issuer Default Rating of these five banks along with six others was confirmed.

Poland's Central Statistical Office announced that the industrial producer price index or PPI rose 5.6% year-over-year in March, slower than the 5.7% increase in February, revised from 5.4% reported initially. Economists were looking for an increase of 5.8%. Further, the agency reported that the industrial production dropped 2% year-over-year in March, after falling a revised 14.6% in February. Economists had predicted a decline of 9.9%.

The Hungarian central bank left its key interest rate unchanged at 9.5% for the third month in a row, as expected.

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