-Adds Detail To Version Transmitted At 0830 GMT
-Q2 Preliminary GDP -0.7% q/q; -0.8% y/y

LONDON (MNI) – UK economic output plummeted in the second quarter
as growth was hit by the impact of the Jubilee and exceptionally poor
weather, figures released by National Statistics showed Wednesday.

While the headline fall has been exaggerated by the impact of
one-off factors, and we could see some recovery in Q3, underlying growth
is likely to be close to flat or declining. The poor outturn makes it
more likely that over 2012 as a whole we’ll see little or no growth in
the UK economy.

Total economic output is now down 4.5% below the peak in Q1 2008
and slightly below the level just before the latest government took
power in 2010.

GDP growth fell 0.7% on the quarter in Q2 and was down by 0.8% on
the year. This was significantly below the median forecast for a milder
0.2% quarterly drop and 0.3% decline on the year and was the largest
quarterly decline since Q1 2009.

National Statistics highlighted two special factors in Q2 which had
depressed growth, although were unable to quantify their impact.

The Queen’s Diamond Jubilee meant there was one fewer working day
than usual due to the additional Bank Holiday and the May to June period
was the wettest on record.

Services output fell 0.1% on the quarter, with a notable 1.4% drop
in transport, storage and communication output and a 0.4% fall in
distribution, hotels and restaurants. Business services and finance and
government and other services output rose 0.1% and 0.3% respectively.

For June, National Statistics said that they expected services
output to have fallen by 2.2% on the month.

While services growth was hit by special factors, it was the
construction and industrial sectors which bore the brunt of the negative
Jubilee and wet weather effects.

Construction output plunged 5.2% on the quarter, the weakest since
Q1 2009 with National Statistics estimating that output fell 7% between
May and June.

Industrial production was down 1.3% on the quarter, with National
Statistics estimating output fell 3.5% on the month in June.

Today’s figures are preliminary and subject to revision and more so
than usual due to the uncertainties surrounding the special factors.
Many of the figures for June at this stage are forecast and so caution
should be exercised when looking at the data.

National Statistics’ Chief Statistician Joe Grice said underlying
economic activity was better than the headline figures showed and that
the scope for revisions to the GDP numbers was larger than usual.

He added that today’s GDP figure was a central estimate and there
was equal probability of an upward or downward revision.

NS has not made an estimate of the impact of the Jubilee.

In the May Inflation Report the Bank of England estimated that the
Jubilee may have hit quarterly growth by 0.5 percentage point. At that
time the BOE was forecasting a 0.2% quarterly drop in growth, although
subsequent comments suggest this has already been revised lower and will
be brought down sharply in the upcoming August report.

–London newsroom: 44 20 7862 7491; email: puglow@marketnews.com

[TOPICS: MABDS$,M$B$$$,MT$$$$]

FRANKFURT (MNI) – Eurozone banks expect the slide in loan demand to
slow in 3Q, after expectations for a pick-up in loans in the first half
of the year failed to materialize, the European Central Bank’s quarterly
Bank Lending Survey showed Wednesday

The tightening of credit conditions in the second quarter is
expected to continue over the next three months, albeit at a slower
pace, the survey showed.

The survey of 130 institutions, conducted between June 21 and
July 5, showed that “banks expect a continued decline in the net demand
for loans, both for enterprises and households, even if less negative
than in the second quarter.”

For 2Q, euro area banks continued to report, on balance, a
significant fall in the demand for loans to enterprises, although the
balance was somewhat less negative than in 2Q 2012 (-25% in 2Q vs -30%
in 1Q).

The ongoing decline in net demand for loans to households for house
purchase abated (-21% in 2Q vs -43% in 1Q), whereas net demand for
consumer credit remained broadly unchanged (-27% in 2Q vs -26% in 1Q).

Weak loan demand reflects in part the erosion in business and
consumer confidence amid the slowdown in economic activity and the
sovereign debt crisis. The European Commission’s economic sentiment
index dropped in June to its lowest level since the end of 2009, while
household morale fell in July to its lowest level in almost three years.

Weak demand may also be partially due to the ongoing tightening of
lending conditions that is expected to continue in the months ahead.

The survey showed that banks continued to tighten credit standards
with net tightening broadly stable both for loans to enterprises (10% in
net terms in 2Q vs 9% in 1Q) and for loans to households (13% for
housing loans in 2Q vs 17% in 1Q, and 7% for consumer credit in 2Q,
compared with 5% in 1Q).

Despite recent trends, tightening remains far below expectations in
the Bank Lending Survey of the fourth quarter 2011, which was mostly
conducted before the ECB’s three-year liquidity operations.

At that time, a net of 29% of banks said they planed to tighten
credit conditions for business and home loans, while a net 13% planned
to tighten consumer credit standards. Indeed, the ECB pointed out in
today’s statement that “the net tightening in the second quarter of 2012
was much lower than in the fourth quarter of 2011.”

ECB President Mario Draghi can thus continue to consider the
central bank’s long-term liquidity operations an “unquestionable
success”.

Draghi has attributed weak credit growth primarily to weak demand.
“To a large extent, subdued loan growth reflects the current cyclical
situation, heightened risk aversion, and the ongoing adjustment in the
balance sheets of households and enterprises which weigh on credit
demand,” he explained last month. “Credit is now led predominantly by
demand, and if demand is weak, you would not expect strong credit
growth.”

Nevertheless, Draghi conceded that supply-side constrains have not
been fully overcome: “There are at least three sets of reasons why banks
may not lend. One is risk aversion, another is a lack of capital, and
the third is a lack of funding. We have removed only the third, not the
other two.”

Banks access to retail and wholesale funding in the 2Q deteriorated
in 2Q after the improvement seen in 1Q with banks reporting “some
deterioration in their access to retail and wholesale funding across all
funding categories, albeit below the high levels seen in the fourth
quarter of 2011.”

Banks participating in the survey noted that “in the second
quarter of 2012 sovereign market tensions impacted substantially more on
banks’ funding conditions than in the previous quarter,” the ECB said.

– Frankfurt bureau: +49 69 720 142, email: jtreeck@marketnews.com –

[TOPICS: MT$$$$,M$$EC$,M$X$$$,M$$CR$,MGX$$$]

-Q2 Preliminary GDP -0.7% q/q; -0.8% y/y

LONDON (MNI) – UK economic output plummeted in the second quarter
as growth was hit by the impact of the Jubilee and exceptionally poor
weather, figures released by National Statistics showed Wednesday.

While the headline fall has been exaggerated by the impact of
one-off factors, and we could see some recovery in Q3, underlying growth
is likely to be close to flat or declining. The poor outturn makes it
more likely that over 2012 as a whole we’ll see little or no growth in
the UK economy.

Total economic output is now down 4.5% below the peak in Q1 2008
and slightly below the level just before the latest government took
power in 2010.

GDP growth fell 0.7% on the quarter in Q2 and was down by 0.8% on
the year. This was significantly below the median forecast for a milder
0.2% quarterly drop and 0.3% decline on the year and was the largest
quarterly decline since Q1 2009.

National Statistics highlighted two special factors in Q2 which had
depressed growth, although were unable to quantify their impact.

The Queen’s Diamond Jubilee meant there was one fewer working day
than usual due to the additional Bank Holiday and the May to June
period was the wettest on record.

Services output fell 0.1% on the quarter, with a notable 1.4% drop
in transport, storage and communication output and a 0.4% fall in
distribution, hotels and restaurants. Business services and finance and
government and other services output rose 0.1% and 0.3% respectively.

For June, National Statistics said that they expected services
output to have fallen by 2.2% on the month.

While services growth was hit by special factors, it was the
construction and industrial sectors which bore the brunt of the negative
Jubilee and wet weather effects.

Construction output plunged 5.2% on the quarter, the weakest since
Q1 2009 with National Statistics estimating that output fell 7% between
May and June.

Industrial production was down 1.3% on the quarter, with National
Statistics estimating output fell 3.5% on the month in June.

Today’s figures are preliminary and subject to revision and more so
than usual due to the uncertainties surrounding the special factors.
Many of the figures for June at this stage are forecast and so caution
should be exercised when looking at the data.

In the May Inflation Report the Bank of England estimated that the
Jubilee may have hit quarterly growth by 0.5 percentage point. At that
time the BOE was forecasting a 0.2% quarterly drop in growth, although
subsequent comments suggest this has already been revised lower and will
be brought down sharply in the upcoming August report.

–London newsroom: 44 20 7862 7491; email: puglow@marketnews.com

[TOPICS: MABDS$,M$B$$$,MT$$$$]

UK DATA: Q2 Preliminiary GDP -0.7% q/q; -0.8% y/y
————————————————————————
Q2 UK economic output plummeted in Q2 by far more than the median
forecast, hit by the impact of the Jubilee and poor weather. While the
headline fall has been exagerrated by the impact of one-off factors, and
we could see some recovery in Q3, underlying growth is likely to be
close to flat or declining. The poor outturn makes it more likely that
over 2012 as a whole we’ll see little or no growth in the UK economy.
The 0.7% q/q fall was the largest quarterly decline since Q1 2009.
National Statistics made clear that there were two special events in Q2
which had depressed growth, although were unable to quantify their
impact. Services output fell 0.1% on the quarter, construction output
plunged 5.2% on the quarter and industrial production was down 1.3% on
the quarter.

ITALY DATA: July SA consumer confidence rose to 86.5 from 85.4 in
June, when the index hit the lowest level since the January 1996
series start.
- Sentiment on the general economic climate and on the future
outlook improved, while confidence in the current and personal climate
declined.
- Expectations for unemployment improved (July 112 Vs June 120).
- Consumers’ sentiment on the economy rose to 68.6 from 60.3
- Confidence in the future outlook rose to 79.8 from 72.9
- Sentiment on the current climate dropped to 92.6 from 95.5

From 85.4 in June,  better than median forecast of 85.0

EUR/USD trades at 1.2125 having been as high as 1.2135.  Rally in EUR/GBP after dire UK GDP data has provided the single currency with a further lift.

As mentioned earlier sell orders clustered 1.2130/50, buy stops above there.

Exceeding even the most dire forecasts and much worse than the median forecast of -0.2%.

EUR/GBP has spiked over .7800, presently at .7825.

Y/Y contraction -0.8%, much worse than median forecast of -0.3%.

ONS says extra public holiday, poor weather hurt Q2 GDP and led to “additional uncertainty” in calculating GDP during June.

That’s as maybe.  Doesn’t disguise the reality that the economy is in the tank

Jul MNI analysts survey Jun May
median range
————————————————————————
Business sentiment: 103.3 104.5 103.0 – 105.3 105.2 106.9
Current conditions 111.6 113.0 111.5 – 113.9 113.9 113.2
Six-month outlook: 95.6 96.1 95.3 – 97.3 97.2 100.8
–

FRANKFURT (MNI) – German business confidence eroded more than
generally expected in July to its lowest level since early 2010, as
firms adjusted downward their assessment of both the current situation
and the near-term outlook, the Ifo institute reported on Wednesday.

Taking into account the 0.1 point revision to June’s reading,
July’s 1.9-point drop brought the headline figure to 103.3, a 28-month
low.

“The euro crisis is having an increasingly negative impact on the
German economy,” said Ifo President Hans-Werner Sinn in a press release.

After a recovery in June, the current conditions component fell
back 2.3 points to 111.6, its worst result since June 2010. Expectations
also retreated further, slipping 1.6 points to a 37-month low of 95.6.

The erosion in business confidence comes on the heels of the sixth
consecutive fall in Germany’s composite PMI to its lowest level (47.3)
in over three years.

“A solid overall drop in output during July represents the worst
start to any quarter since Q2 2009,” said Markit Economics senior
economist Tim Moore. “Moreover, an accelerated decline in new work means
that the stage could well be set for a steeper drop in GDP than the 0.2%
fall recorded at the end of 2011.”

This month’s ZEW survey of analysts also revealed growing pessimism
about Germany’s prospects six months ahead. Still, ZEW President
Wolfgang Franz saw a silver lining in the clouds, as the decline in
sentiment has slowed markedly: “This could possibly be an early sign of
an encouraging development in 2013.”

“However, risks should not be underestimated,” Franz warned.
“Besides the weak demand from the Eurozone for German exports, the
German economy is also burdened by weakening growth dynamics in other
important partner countries.”

The Bundesbank is also cautious in its assessment, noting the
“great uncertainty” characterizing the economic outlook.

With household demand still relatively strong, the DIW research
institute sees Germany averting recession this year, though it expects a
significant pick-up in exports only at the end of 2012. “The crisis in
the Eurozone is weighing more heavily on the German economy than
previously expected,” it said.

– Frankfurt bureau: +49 69 720 142; email: frankfurt@marketnews.com –

[TOPICS: M$G$$$,MT$$$$,M$X$$$,M$XDS$,MAGDS$,MTABLE]

• Expects German growth of 0.1% in Q2, Q3
• German economy continues to do well compared to rest of Europe, it could get worse (“compared to rest of Europe”, BIG deal)
• Export expectations have almost stabilised, lower euro rate is helping
• Does not see German AAA credit rating in danger, Moody’s statement was warning not to overstretch Germany
• Consumption continues to be robust, retail is the bright spot in Ifo survey
• Private consumption has not yet been hit by crisis, no signs yet of that changing
• Sees no reason for further interest rate cut, uncertainty is coming from politics

Ughh

Worse than median forecast of 104.5

EUR/USD sits at 1.2093 presently,  Asian central bank and macro funds notable sellers into latest rally above 1.2100.

Anyone delayed the German Ifo?

Out in a few minutes, business climate expected 104.5 from 105.3.

Hardly surprising given what’s going on.

Re giving ESM banking license

“I think there are pro arguements for this” adding “there are also other arguements, but I would see this as an ongoing discussion” and finally he is ”not aware of specific discussions within the ECB at this point.”

That last part might dilute the euphoria.

Comments made during an interview on Bloomberg TV

– corrects fixed rate to read 0.66%, not 0.67% as previously stated

FRANKFURT (MNI) – The European Central Bank said Wednesday that it
will launch a 7-day liquidity providing operation to ease pressures in
the short-term U.S. dollar funding markets.

The operation is carried out at a fixed rate of 0.66% with the
central bank planing to satisfy all bids received against eligible
collateral. The minimum bid is $5 million. The Euro/USD rate is set at
1.2061.

Bids for today’s operation are due by 7:45 GMT today. Tender
results will be announced at 09:00 GMT.

–Frankfurt Bureau tel.: +49-69-720 142, email: frankfurt@marketnews.com

[TOPICS: M$$CR$,M$X$$$,M$XDS$,MN$MM$,M$$EC$]

Given euro a boost.

Also

• ESM gaining banking license is ongoing discussion
• ECB not talking about negative deposit rate for now (that’s a shame)
• Negative interest rates on deposits might have some technical problems
• Growth dynamics in euro zone lower than was expected at beginning of year
• Inflation also tends to be lower than previously expected
• ECB sees no deflation perspective

EUR/USD up at 1.2095 having spiked as high as 1.2115 (EBS) after Nowotny comments hit Bloomberg.

Sell orders clustered up at 1.2130/50, buy stops above there.

European stocks pretty much back to flat on the day.

2 year yield up over 7%, presently 7.10%

FRANCE DATA: 3Q mfg demand outlook much weaker at -14 vs 2Q +4
–3Q foreign mfg demand outlook also weaker at -11 vs 2Q -3
–July mfg capacity utilization 81% vs 80% in April
–3Q sa mfg PPI seen -0.1% q/q; 2Q was +0.1% q/q

Points to continued weakness in Q3 

JAPAN DATA: Domestic production by top three carmakers indicate Japan’s
combined auto output continued to rise in June:
–Toyota Motor’s domestic output +24.8% y/y in June, vs +155.8% in May
–Nissan Motor’s output -2.5% y/y, from +5.2% in May
–Honda Motor’s output +112.6% y/y, little changed from +113.1% in May.

BERLIN (MNI) – Greece will be granted at most a couple of months
more time to meet its fiscal and reform goals but not the two years
desired by Athens, a senior member of German Chancellor Angela Merkel’s
CDU/CSU-FDP government coalition said Wednesday.

“One can talk about a few weeks or maybe a couple of months but
surely not about a delay of two years,” FDP parliamentary leader Rainer
Bruederle, a former Economics Minister, told German ZDF public
television.

“There will be no majority in the Bundestag [Germany's lower house]
for additional aid for Greece” beyond that already agreed, Bruederle
stressed. Moreover, if Greece doesn’t adhere to the fiscal and reform
goals agreed with its Eurozone peers and the IMF, even the already
agreed fiscal aid won’t be paid out any further, he added.

Bruederle said the Eurozone is now better prepared for a Greek exit
from the Eurozone than two years ago when the debt crisis started.
Still, he acknowledged that this will “not be an easy story and will
also prompt significant turbulences.”

–Berlin bureau: +49-30-22 62 05 80; email: twidder@marketnews.com

[TOPICS: MGX$$$,M$X$$$,M$$CR$,M$G$$$,MFX$$$,M$Y$$$,MT$$$$]