Belgium: Economic growth likely to slow
August 29, 2011
June data for industrial production confirmed the slowdown in economic activity showed in the preliminary GDP estimate for the second quarter. Industrial output plummeted a working-day adjusted 4.2% over June last year, which contrasted the 11.8% annual expansion registered in May. The reading marked the first contraction since November 2009. A month-on-month comparison confirms the deterioration suggested by the annual figures, as industrial output contracted a seasonally-adjusted 7.4% (May: +4.9% mom). Moreover, Belgium is likely to continue to report weak economic growth in the third quarter, as both business and consumer confidence indicators deteriorated sharply in August. Consumer confidence fell from minus 4 points in July to minus 9 points in August, the lowest level since June 2010. The August survey showed that consumers assessed the general economic situation for the next 12 months as more negative compared to the previous survey. In addition, the August result showed a majority of respondents expecting unemployment to increase. Simultaneously, business confidence plummeted to its lowest level in 20 months, from minus 2.5 points in July to minus 7.8 points in August, which was well below market expectations that had envisaged the index moderating to minus 3.5 points. The deterioration in business confidence reflected firms' negative business prospects in the year ahead, in particular in the manufacturing and construction sectors. The Central Bank anticipates that the economy will grow 2.6% this year, before slowing to 2.2% in 2012.
Author: Ricardo Aceves, Senior Economist