Eu­ro­zone’s 0.4% growth lifts it out of re­ces­sion

Weekend Argus (Saturday Edition) - - LIFE -

LON­DON: The 16-coun­try eu­ro­zone has of­fi­cially joined the US and Ja­pan out of re­ces­sion, af­ter fig­ures yes­ter­day showed its econ­omy grew by 0.4 per­cent in the third quar­ter from the pre­vi­ous three-month pe­riod.

But the rise re­ported by EU statis­tics of­fice Euro­stat was not as large as the 0.6 per­cent most economists had pre­dicted, as growth in ma­jor economies fell short of fore­casts. With a re­bound in ex­ports par­tially off­set by weak house­hold spending, Ger­many’s econ­omy grew by 0.7 per­cent and France’s by 0.3 per­cent.

Still, the third-quar­ter rise in eu­ro­zone out­put was the first in six quar­ters and brings to an end Europe’s sharpest re­ces­sion since World War II.

Though the eu­ro­zone’s banks were not at the epi­cen­tre of the fi­nan­cial cri­sis that trig­gered the global eco­nomic down­turn, the re­gion suf­fered as de­mand for its high-value prod­ucts fell off a cliff.

The re­ces­sion was par­tic­u­larly sav­age at the turn of the year. The 1.8 per­cent quar­terly de­cline recorded in the fourth quar­ter of last year was fol­lowed by a big­ger 2.5 per­cent drop in the first quar­ter of this year. In the sec­ond quar­ter of this year, out­put fell 0.2 per­cent as Ger­many and France emerged from re­ces­sion.

The scale of the down­turn in the eu­ro­zone is clearly vis­i­ble in the an­nual com­par­isons.

Al­though eu­ro­zone out­put grew on a quar­terly ba­sis, it was 4.1 per­cent be­low lev­els a year ago in the third quar­ter, a mod­est im­prove­ment on the 4.8 per­cent slide recorded in the pre­vi­ous three months.

De­spite the mod­est im­prove­ment, growth is not ex­pected to re­turn to pre-cri­sis lev­els for a while yet, mean­ing the out­put lost dur­ing the re­ces­sion will take years to be made up.

In­sti­tu­tions like the In­ter­na­tional Mon­e­tary Fund have warned re­cov­ery will be anaemic if pol­i­cy­mak­ers don’t do more to sort out prob­lems in the fi­nan­cial sec­tor, and as long as ris­ing un­em­ploy­ment keeps con­sumer con­fi­dence down. In Spain, the job­less rate stands at an as­ton­ish­ing 19.3 per­cent.

“The re­gion is at least out of re­ces­sion and still on track to grow by a rea­son­ably solid 1.5 per­cent odd next year. But there is scant ev­i­dence yet of the pick-up in do­mes­tic de­mand needed to sus­tain a stronger re­cov­ery,” says Jonathan Loynes, chief Euro­pean econ­o­mist at Cap­i­tal Eco­nomics.

The US also re­turned to growth in the third quar­ter, grow­ing by a quar­terly rate of 0.9 per­cent, says Euro­stat. Mean­while, Ja­pan’s re­ces­sion ended in the sec­ond quar­ter when its econ­omy grew by 0.2 per­cent.

Al­though most eu­ro­zone coun­tries are out of re­ces­sion – in­clud­ing Italy, whose econ­omy grew 0.6 per­cent – some con­tin­ued to con­tract. Fig­ures show Spain’s econ­omy shrank 0.3 per­cent in the third quar­ter as it con­tin­ued to reel from the col­lapse of its prop­erty mar­ket.

Partly be­cause of the patchy re­cov­ery, an­a­lysts warned pol­i­cy­mak­ers to be care­ful about how they start tak­ing back some of the stim­u­lus mea­sures they set up to pre­vent the re­ces­sion from turn­ing into a de­pres­sion.

The Euro­pean Cen­tral Bank slashed its bench­mark in­ter­est rate to a record-low 1 per­cent, while eu­ro­zone gov­ern­ments in­creased spending to sup­port their economies. – Sapa-AP

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