Belgium Enters Recession as Car Sales, Weather Soften Blow

Belgium’s economy contracted less than initially estimated in the fourth quarter as consumers brought forward car purchases before incentives expired and milder-than-usual weather boosted construction.

Gross domestic product in Belgium, the sixth-largest economy in the euro area, shrank 0.1 percent in the fourth quarter from the previous three-month period, the National Bank of Belgium said today in a statement from Brussels. That compares with a Feb. 1 preliminary estimate of a 0.2 percent contraction. The economy expanded 1 percent from the year- earlier period and grew 1.9 percent in the year.

A recovery in consumer spending and construction in the final months of 2011 may have been temporary as Belgium entered a recession for the second time in three years. Registrations of new cars plunged 17 percent in the first two months of this year and the longest cold spell in 70 years in February probably affected construction output, which benefited from milder-than- usual weather in December.

“Interior demand will continue to be weak in the first half because of fiscal tightening,” Steven Vanneste, an economist at Fortis Bank NV who forecasts a 0.3 percent contraction this quarter, said by telephone from Brussels. “We expect to see some export-led growth in the second half again, which should trickle through into interior demand fairly soon.” Vanneste forecasts the Belgian economy will stagnate this year.

Exports Shrink

Even as construction output increased 0.7 percent in the quarter, the services industry contracted for the first time in more than 2 1/2 years and manufacturing output stagnated following a 0.3 percent contraction in the preceding three-month period. Exports shrank for a third consecutive quarter and corporate investments fell 0.7 percent, the biggest contraction in seven quarters.

While Belgian business confidence has improved for three straight months because of rising demand prospects, consumer sentiment dropped to the lowest level in almost three years in February on the outlook for employment and the economy.

National employment fell for the first time in more than two years in the fourth quarter, with about 4.63 million people working, the National Bank said today.

The nation’s economy will contract 0.1 percent this year, the central bank forecast on Feb. 15, and the government is seeking an additional 2 billion euros of spending cuts or tax increases to meet its target for a budget deficit of 2.8 percent of gross domestic product this year.

To contact the reporter on this story: John Martens in Brussels at jmartens1@bloomberg.net

To contact the editor responsible for this story: Jerrold Colten at jcolten@bloomberg.net

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