Shrinkage of eurozone economy set to continue
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The eurozone economy shrank between October and the end of December, official figures suggest, leading commentators to expect further contraction in the coming quarters.
A flash estimate published last week by Eurostat, the European Union’s statistical office, shows GDP fell by 0.3% quarter-on-quarter in both the eurozone and the wider union during the final three months of 2011.
This is the first time the eurozone economy has contracted since the third quarter of 2009, when the single currency bloc came to the end of its six-quarter-long recession. (article continues below)
Few of the eurozone’s 17 members managed to achieve growth over the period, although France saw its economy expand by 0.2% after improvements in its foreign trade balance and business investment levels.
Italy went into recession as the fourth quarter’s 0.7% contraction followed the 0.2% fall in the third. The recessions in Greece and Portugal deepened over the quarter, while the Netherlands and Belgium - core northern economies - went into recession.
Germany, the eurozone’s largest economy, also shrank by 0.2% quarter-on-quarter. Activity was supported by higher business investment, but falling consumer spending and net exports acted as a drag.
Howard Archer, the chief European economist at IHS Global Insight, expects eurozone GDP to continue to contract over the first quarter of 2012, and “very possibly” the second, before seeing gradual growth in the latter half of the year.
“Even so, we still see eurozone GDP shrinking by around 0.5% overall in 2012, held back significantly by extended contraction in Italy and Spain,” Archer adds.
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