Anemic corporate sales may indicate the euro zone is sinking back into recession.

Photographer: Wolfgang von Brauchitsch/Bloomberg

European Companies Aren't Selling Enough Stuff

Mark Gilbert is a Bloomberg View columnist and writes editorials on economics, finance and politics. He was London bureau chief for Bloomberg News and is the author of “Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable.”
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As Europe's governments debate whether increased austerity or a dash for growth would best resuscitate the economy, it's clear that euro-zone companies aren't achieving anything like the sales growth of their U.S. counterparts. That suggests the European Central Bank will struggle to prevent the economy from sliding back into recession.

Revenue at European companies finally turned positive in the third quarter, after contracting for four consecutive quarters, according to data compiled by Bloomberg (based on earnings by Stoxx Europe 600 companies). Sales growth of 0.28 percent, however, looks anemic next to two consecutive quarters of better than 4 percent for U.S. companies in the Standard & Poor's 500 Index:

Dig into the detail, and the euro picture gets even worse. Those lackluster revenue figures are being propped up by a surge in the financial industry, which delivered third-quarter growth of 8.45 percent. That compensated for slumps in a range of sectors including oil and gas, utilities, industrials, and technology and telecommunications:

So while European earnings growth was an eye-catching 14 percent in the previous quarter, it's all coming from cost cutting -- bad news if you're one of the 11.5 percent without a job.

Figures on Friday will probably show that the euro region eked out a 0.1 percent increase in third-quarter gross domestic product after the economy was flat in the second quarter, according to the median forecast of economists surveyed by Bloomberg. That's still close enough to zero to make no difference. Unless the euro area can get out of its tailspin, it faces a lost generation of Europeans with no work and no prospects.

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