Eurozone shrinks most since 2009; recession deepens
2013-02-14 15:00:28
The Eurozone contracted the most since the first quarter of 2009, after the unresolved sovereign debt crisis took its toll even on the economic powerhouse Germany.
Gross domestic product declined at a faster-than-expected pace of 0.6 percent, much bigger than the previous quarter's 0.1 percent fall, flash estimates from Eurostat showed Thursday. It was worse than a 0.4 percent drop forecast by economists.
The third straight quarter of contraction signals recession deepened in the bloc. However, recent private surveys pointed to an improvement in activity and confidence at the start of 2013.
It looks likely that only a renewed serious overall downturn in Eurozone economic activity will prompt the European Central Bank into an interest rate cut, IHS Global Insight's Chief European economist Howard Archer said.
On a yearly basis, the decline in Eurozone GDP worsened to 0.9 percent from 0.6 percent in the third quarter. Economists had forecast a 0.7 percent drop. A detailed breakdown of GDP will be available on March 6.
The EU27 shrank 0.5 percent in the fourth quarter from a quarter ago and fell 0.6 percent from the same period of last year.
The weakness was widespread across the region with the German and France economies declining more-than-expected in the fourth quarter.
Germany's GDP was down 0.6 percent and France's output dropped 0.3 percent. While Germany and France avoided recession, the Italian economy contracted for the sixth straight quarter.
Falling shipment was the major factor behind negative GDP in both Germany and France. This will no doubt fuel fears over the economy's vulnerability to the strong euro, says Jonathan Loynes, chief European economist at Capital Economics.
The Italian and Spanish GDP dropped 0.9 percent and 0.7 percent, respectively. Although Austria shrank 0.2 percent, it avoided a recession due to the expansion in the previous quarter.
The Dutch economy slipped into recession in the fourth quarter, with GDP falling 0.2 percent, following a 1 percent decline in the third quarter. On the other hand, Estonia and Slovakia continued to expand at the end of the year.
The Greece economy is now in its fifth year of recession. GDP declined 6 percent from a year ago in the fourth quarter. Portugal's GDP fell 1.8 percent, after easing 0.9 percent in the third quarter and by 1 percent in the second quarter.
Cyprus also contracted at a faster pace of 3.1 percent on an annual basis in the fourth quarter, following a 2 percent fall in the third quarter.
Over the whole year 2012, GDP fell by 0.5 percent in the euro area and by 0.3 percent in the EU27.
Professional Forecasters lowered real GDP growth expectations for 2013 to zero from 0.3 percent growth, citing weaker than expected development in the fourth quarter of 2012, results of an ECB survey showed today.
The outlook for 2014 was reduced to 1.1 percent from 1.3 percent. Growth is seen at 1.6 percent in 2015.
The International Monetary Fund sees large downside risk to the global outlook from the euro area. Economic activity is now expected to contract 0.2 percent in 2013, which is in contrast to the lender's previous projection of 0.2 percent growth.