Eurozone Growth Stalls In Last Quarter Of 2009

[newsroom]

Eurozone Growth Stalls In Last Quarter Of 2009 And Bad Start To 2010 Likely

The recovery in the eurozone stalled in the final quarter of 2009 according to the downwardly revised estimate of gross domestic product released by Eurostat this morning. The data showed that quarterly growth slowed to 0.0% in the fourth quarter of 2009, down from 0.4% in the third quarter and slightly lower than the 0.1% previously estimated. Economic output in the 27 member strong European Union also slowed to 0.1% over the same period, after growing by 0.3% in the third quarter of 2009.

On an annual basis the eurozone’s gross domestic product in the final quarter of 2009 was 2.2% lower compared to the final quarter of 2008, up from a 4.1% contraction in the third quarter.

With the exception of France, most large eurozone member states experienced poor growth in the fourth quarter of 2009. France’s gross domestic product grew by 0.6% in the fourth quarter – up from 0.2% in the third quarter. Germany’s economy stalled with output growth flat in the final quarter of 2009, following a 0.7% expansion in the third quarter. The Spanish economy continued to decline by 0.1% quarter-on-quarter, following a 0.3% contraction in the third quarter. The third quarter bounce in Italy also proofed to be short lived as gross domestic product contracted by 0.3%, after a 0.5% increase in the third quarter. Defying hopes of a stabilisation to the economy, Irish fourth quarter output contracted by 2.3% quarter-on-quarter, after contracting by 0.1% in the third quarter.

Today’s data clearly highlight the fragile and unsustainable nature of the eurozone recovery. Investment, household consumption and government consumption contributed little to growth in the fourth quarter, with re-stocking and exports only contributing modest growth. Looking forward, the German economy has picked up in March, although this has come on the back of a very bad start to the year. Construction, industrial production, retail sales and exports were all hit by the severe weather over January and part of February. Purchasing managers’ data for France also points towards weak growth over the first quarter of 2010. This suggests that the eurozone is unlikely to see much, if any, growth when the flash estimate for Q1 2010 growth is released next month.