Reply #27: And what about Europe?

[Ghost Dog]

And what about Europe?
Standing on its own feet
http://economist.com/business/displaystory.cfm?story_id=8049665

Oct 19th 2006
From The Economist print edition
Developments in America matter less than those at home—or in Asia

FOR years continental Europe has been regarded as the weakling of the world economy, wheezing along behind healthy, trim America and young, gambolling Asia. Only with the occasional piggy-back from American consumers can the decrepit Germans, French and Italians make any progress at all. The thought of what an American slowdown, especially if coupled with a falling dollar, might do to the old continent is enough to make you shudder.

Save your sympathy. This year the strength of the euro area's economies has continued to surprise even optimists: GDP grew by 0.9% in the second quarter and may have managed 0.7% or so in the third, judging by robust data on industrial production and retail sales, and by business surveys. In 2006 the zone looks sure to chalk up its strongest growth rate since 2000. Best of all, for the past year or so it has been relying mainly on its own legpower: most of the growth has come not from trade but from domestic demand.

....

None of this means that a slowdown in America will leave Europe untouched. It will matter, but domestic affairs will count for more. And if they do worry about what goes on abroad, Europeans will perhaps be looking east rather than west. Last year, goods exports to America were, at €185 billion ($230 billion), only a little more than in 2001 (in euro terms; in dollars, they grew by more). Sales to Asia were, at €244 billion, €44 billion up over the same period.

On the import side, the change has been even more dramatic. In 2001 the euro zone's purchases from China alone, at €57 billion, were less than half those from America. In 2005 China sent €118 billion-worth of goods to the euro area, a whisker behind America's €120 billion-worth. Since the third quarter of last year, indeed, China has outstripped America as a supplier to the zone; now only Britain lies ahead.

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