Euro-area exports fell in the fourth quarter for the first time in more than three years and investment declined as the sovereign debt crisis pushed the region deeper into a recession.
Shipments from the euro area dropped 0.9 percent in the last three months of 2012, helping to drive gross domestic product down 0.6 percent, the European Union’s statistics office in Luxembourg said today. Exports last declined in the second quarter of 2009. Imports also fell 0.9 percent in the fourth quarter.
“Real economic activity is yet to show major improvement in many countries and it looks highly likely that growth will remain a major struggle for the euro zone for some time to come,” Howard Archer, chief European economist at IHS Global Insight in London, wrote in a note today.
The 17-nation currency bloc’s economy recorded a third straight decline in the fourth quarter, a trend that will continue in the first three months of 2013, according to a Bloomberg News survey of economists. The European Commission sees the economy shrinking 0.3 percent this year.
The European Central Bank will maintain its benchmark interest rate at 0.75 percent tomorrow with the euro area mired in a recession and political instability in Italy after an inconclusive election, according to a separate Bloomberg survey. The ECB will also update its economic forecasts.
“From the economic point of view you could justify a rate cut now or in the coming month, but at the same time we also do see that political complacency has joined the game again,” Carsten Brzeski, senior economist at ING Group in Brussels, said on March 4. “The ECB would be very hesitant to do something as long as we have this new political uncertainty in Italy.”
Italian voters in a Feb. 24-25 election rejected the German-inspired austerity put into practice by outgoing Prime Minister Mario Monti, denying a majority in parliament to front-runner Pier Luigi Bersani and throwing the country into political chaos. Monti blamed crisis-management mistakes at the European level for his defeat.
“Austerity doesn’t work; the impact on Italian consumers is catastrophic,” Sergio Marchionne, chief executive officer of Italian carmaker Fiat SpA, said yesterday at the Geneva Motor Show. “I understand austerity, but we can lose weight until we die.”
Gross fixed capital formation dropped 1.1 percent from the previous three months, when it fell a revised 0.8 percent, today’s report showed. Consumer spending was down 0.4 percent, while government spending slipped 0.1 percent.
In Germany, Europe’s largest economy, GDP fell 0.6 percent in the fourth quarter, compared with a 0.2 percent increase in the previous three months. France’s economy contracted 0.3 percent, while Italy’s GDP dropped 0.9 percent. Spain’s economy shrank 0.8 percent.
As euro area finance ministers meeting in Brussels earlier this week grappled with Italy’s austerity backlash and a bailout request from Cyprus, German Chancellor Angela Merkel indicated that she is sensitive to criticisms that budget cutting has been overdone.
“We’ve done a lot to stabilize the euro,” Merkel said in Hanover on March 4. “We’ve done quite a bit to consolidate budgets, but we always have this discussion about growth, and don’t quite have the answers for where the growth should come from.”
Europe’s economic gloom contrasted with news from Australia, whose economy expanded in 2012 at the fastest pace in five years as resource investment and exports outweighed subdued manufacturing and construction.