EU on brink of recession

Both the  Eurozone and the EU27 are now closer than ever to another recession.  That much is clear from the latest GDP figures for the second quarter of the year released by Eurostat.   GDP growth, which had slipped into negative mode in the fourth quarter of 2011 and then remained stable in the first quarter of 2012, decreased by 0.2 percent and 0.1 percent respectively.

It is not technically a recession, which requires two successive months of negative growth, but it is as damned close as can be.  Since then, all the indications from the Markit Purchasing Managers Index and from EU confidence indices have been that the situation in the third quarter deteriorated.  Most analysts expect the EU and Eurozone to have slipped formally into recession over the last couple of months.

Of 23 countries which reported their GDP, 11 had a negative growth rate in the second quarter compared to the first quarter of 2012, whereas 12 registered a negative growth in the second quarter of this year compared to last year.  The highest quarterly drop was in Portugal (-1.2%), followed by Slovenia and Finland (-1.1%). 

Eleven countries registered a quarter-on-quarter growth, with the best result being achieved by Sweden (+1.4%).  But Germany could only manage a 0.3 percent quarterly growth and a 1.0 percent annual growth.   France’s GDP growth rate was nil on a quarterly basis and slightly up on an annual basis.

The negative quarter-on-quarter growth in the Eurozone/EU27 was caused by lower household consumption and gross fixed capital formation.  Exports were slightly up.   More or less the same trends apply to the annual growth.

The negative growth rate in the Eurozone/EU27 contrast with continuing positive, through shallow, growth in GDP in the United States and in Japan.  On an annual basis, US GDP was up by 2.3 percent, whilst Japan’s rose by 3.6 percent.

Eurostat did not publish figures for Malta.