The euro-area economy succumbed to a recession for the second time in four years as governments imposed tougher budget cuts and leaders struggled to contain the debt crisis that broke out in October 2009.
Gross domestic product in the 17-nation bloc slipped 0.1 percent in the third quarter after a 0.2 percent decline in the previous three months, the European Union’s statistics office in Luxembourg said today. The result matched the median forecast in a Bloomberg News survey of 44 economists, as unexpected strength in Germany and France was outweighed by contractions elsewhere.
Europe’s economic malaise is deepening as governments across the region impose budget cuts to narrow their fiscal deficits. Spain and Cyprus this year joined the list of countries seeking external aid, following Greece, Portugal and Ireland. Unions across the region have held protests against austerity measures.
“Overall I think it’s remarkable that we haven’t seen so far in the last year a stronger decrease in economic activity considering the strength of the euro-zone debt crisis,” said Alexander Krueger, chief economist at Bankhaus Lampe in Dusseldorf. “Stopping the downward trend is the story for the first half of next year.”
Slower German Growth
The euro was up 0.3 percent at 12:27 p.m. in Brussels, trading at $1.2769. The Stoxx Europe 600 Index was down 0.6 percent.
The annual inflation rate in the euro area dropped to 2.5 percent annual in October from 2.6 percent the month before, the statistics office said in a separate report today.
In Germany, Europe’s largest economy, GDP rose 0.2 percent after a 0.3 percent gain in the previous three months. The French economy expanded 0.2 percent, rebounding from a 0.1 percent contraction in the second quarter. Italy and Spain contracted 0.2 percent and 0.3 percent, respectively. In the 27-country EU, GDP rose 0.1 percent.
Greece and Portugal published third-quarter GDP figures yesterday, which showed the Greek economy contracting for a 17th straight quarter and the Portuguese economy completing its second year in recession. By the end of this year Greek output will have dropped by a fifth since it entered its recession in 2008.
Europe’s economic gloom contrasts with signs of green shoots in the U.S., where housing demand is strengthening and companies are hiring, and China, where factory output and retail sales are accelerating. The two countries are responsible for a third of the world economy.
East Asian countries are poised to report gross domestic product data that may mark the bottom of the region’s slowdown, as signs of a recovery in China and the U.S. herald a revival in demand for exports.
The European Commission last week cut its 2013 growth forecast for the euro-area economy to 0.1 percent, down from a May projection of 1 percent. The euro-area unemployment rate is at a record 11.6 percent.
“The latest growth indicators around the world, as well as the high levels of unemployment in the EU, raise concerns about our economic prospects,” EU Economic and Monetary Affairs Commissioner Olli Rehn said yesterday. “The indicators point to further short-term weakness.”
Euro-area industrial production dropped 2.5 percent in September from the previous month, the most in more than three years, led by double-digit declines in Portugal and Ireland. German investor confidence unexpectedly declined in November, the ZEW Center for European Economic Research in Mannheim said on Nov. 13.
Siemens AG, the biggest engineering company in Europe, on Nov. 8 unveiled a 6 billion-euro savings plan to restore profitability, acknowledging it was slow to react to shrinking demand. Commerzbank AG, which is forgoing its dividend, on Nov. 8 reported profit that missed analysts’ expectations on losses from non-core assets and a decline in consumer banking earnings.
“As we’ve moved through the year we have seen some greater pressure coming on to some of the core European economies as well,” Myles Lee, chief executive officer of CRH Plc, a Dublin-based building materials company, said in a Bloomberg TV interview yesterday.