The 3Q GDP readings for Portugal and Greece released yesterday confirm continued problems within eurozone peripheral economies. Greece’s recession, now in its fifth year, has been deepened by austerity measures imposed by international lenders in exchange for bailouts. The same is true for Portugal, now in its second year of recession. With more fiscal tightening ahead, the Greek economy is unlikely to escape a sixth year of consecutive recession, continuing to be locked into a vicious cycle between deteriorating economy and austerity. The European Commission currently forecasts Greece will contract by 6.0% this year and 4.2% in 2013. European Commission expects Portugal to contract 3.0% this year and 1.0% next year.
The better than expected 3Q GDP readings for Europe’s two largest economies released today are a bright spot on the eurozone’s economic map. Still, the GDP print showing further deceleration of GDP dynamics in Germany confirms that eurozone crisis hits even the bloc’s strongest economies. It is likely that German economic growth will decelerate further in 3Q amid weakening economic activity in trading partner countries as well as uncertainty related to the eurozone debt crisis, which negatively affects business sentiment and companies investment. The Bundesbank recently said there are “increasing signs” that Germany’s economy will stagnate or see a “slight decrease” in GDP in 4Q12.
• German economic activity has further lost momentum in 3Q, but the slowdown was less than forecasted.
• German GDP expanded by 0.2%q/q, driven by exports, construction and household and public spending, whereas company investment declined, the statistics office said.
• In France GDP rose by 0.2%q/q terms, also beating consensus of 0.0%q/q.
Greece, GDP %y/y (3Q12): -7.2%
Previous (2Q12): -6.3%
Portugal, GDP %y/y (3Q12): -3.4%
Previous (2Q12): -3.2% (revised)
Germany, GDP %y/y nsa (3Q12): 0.4%
Previous (2Q12): 0.5%
Germany, GDP %y/y wda (3Q12): 0.9%
Previous (2Q12): 1.0%
Germany, GDP %q/q (3Q12): 0.2%
Previous (2Q12): 0.3%
France, GDP %y/y (3Q12): 0.2%
Previous (2Q12): 0.1% (revised)
France, GDP %q/q (3Q12): 0.2%
Previous (2Q12): -0.1%