Eurozone Slides Into Recession In Q3

EurozoneGDP 111512

Despite expansions in Germany and France, the euro area officially slipped into a recession in the third quarter as governments across member nations unfold tough austerity measures in the face of widespread protests.

In line with expectations, gross domestic product slid 0.1 percent from a quarter ago, when it dropped 0.2 percent, the flash estimates published by Eurostat on Thursday showed.

The previous recession was in 2008, which lasted until the third quarter of 2009. The region has failed to expand since the third quarter of 2011.

The modest expansions in Germany and France could not help the region from falling into a recession as contraction was not limited to the southern peripheries. During the third quarter, the Netherlands and Austria shrank 1.1 percent and 0.1 percent, respectively.

Both Germany and France expanded 0.2 percent each. Meanwhile, the Italian economy contracted for the fifth consecutive quarter, down 0.2 percent. Spain also remained in deep recession with GDP falling 0.3 percent in the third quarter.

Portugal and Greece, who had sought external bailouts, also continued to be in the negative territory. Portugal's GDP fell 0.8 percent from a quarter ago. Greece's GDP, at the same time, dropped sharply by 7.2 percent year-on-year.

On a yearly basis, the 17-nation economy contracted 0.6 percent in the third quarter, in line with forecast, following a 0.4 percent drop in the previous quarter.

The EU27, meanwhile, expanded 0.1 percent sequentially after shrinking 0.2 percent in the previous three months. Compared to the previous year, GDP declined 0.4 percent.

Going forward, the single currency region is likely to weaken further. The European Commission expects the euro area economy to come to a standstill next year after shrinking 0.4 percent this year.

More monetary stimulus and a weaker currency is required to put Eurozone back on a path of sustained growth, ING Bank NV's economist Martin van Vliet said.

As the economy seems to move further into negative zone, and inflation looking far from alarming, the central bank will cut interest rates to 0.50 percent sooner rather than later, IHS Global Insight's economist Howard Archer said.

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