Loading...
See More

Eurozone narrowly escapes recession

Aug 14 2012 13:31 Reuters

Related Articles

Eurozone GDP to fall by 0.3% this year

Spain debt auction a success

Record unemployment in eurozone

Eurozone factory downturn takes root

Monti fears Europe could tear apart

Eurozone in freefall?

 

Brussels - The eurozone economy narrowly skirted recession in the first half of the year, but austerity programmes across the region and a debt crisis weighing ever more heavily on its periphery suggest the reprieve will be short-lived.

Gross domestic product (GDP) shrank by 0.2% in the second quarter from the first after risk-averse businesses and consumers reined in spending, European statistics agency Eurostat said on Tuesday.

Quarterly growth flatlined in January-March, meaning the region averted the two consecutive quarters of contraction that define a recession. Eurostat revised up the year-on-year GDP figure for that period to zero from a 0.1% contraction.

Europe’s debt crisis intensified during the second quarter, with Greece coming closer to an exit from the single currency and Spain struggling with a banking crisis that pushed its borrowing costs to danger levels.

Analysts agree the gloomy picture is not about to change.

“What we see is a vicious circle of budget cuts, high interest rates in the periphery and sovereign debt rising,” said Aline Schuiling, an economist at ABN AMRO. “There is still a lot of uncertainty related to the crisis.”

A decline in GDP from the end of last year levelled off in the first quarter of 2012 as exports offset a plunge in investment and inventories.

“The economy is avoiding recession by the skin of its teeth, but it will be a temporary reprieve,” Kenneth Wattret, economist at BNP, said.

“You could argue we have one leg in the recession already,“ said Martin Van Vliet, economist at ING. “Leading indicators point to a further contraction in the third quarter, so we might indeed see a technical recession.”

Tuesday’s flash GDP estimate for the second quarter was in line with the average of economists’ expectations as polled by Reuters.

Industrial production, a key component of GDP, fell 0.6% in June from May and 2.1% compared to June 2011, another reading from Eurostat showed. This was slightly above forecasts of a 0.7% and 2.2% fall respectively.

Earlier on Tuesday, Germany posted modest growth in the second quarter, while France stagnated, as Europe’s core gets drawn further into to the debt crisis.

German analyst and investor sentiment also dropped for a fourth straight month in August, undercutting even the lowest forecast in a Reuters poll, a survey showed on Tuesday.


* Follow Fin24 on Facebook, Twitter and Google+.

 
eurozone  |  europe debt crisis
NEXT ON FIN24X

 
 
 

Read Fin24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
0 comments
Add your comment
Comment 0 characters remaining
 

Company Snapshot

We're talking about:

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...
Loading...