The eurozone GDP figures released today were in line with consensus and pointed to another contraction in economic activity in the 17-nation single currency bloc in 3Q. The second consecutive quarter of negative GDP growth in q/q terms means eurozone is now officially in recession, for the second time in four years. The resilience of core countries, with both German and French GDP expanding by 0.2%q/q, was not enough to offset economic slowdown elsewhere and save the bloc from a double-dip recession. Greece and Portugal remain in deep recession, but large countries like Italy and Spain also contracted in 3Q.
It is highly likely that 4Q will bring further deceleration of economic growth in the euro area amid continued austerity in peripheral countries and uncertainty as to resolution of the debt crisis weighing on consumer and business sentiment. European Commission currently forecasts eurozone economy will contract by 0.4% this year and expand by just 0.1% in 2013.
On the positive side, the data released today confirmed eurozone's inflation fell to 2.5% in October from 2.6% in September, and core inflation stabilized at 1.5%. Taking into account the weakening macro environment, lower inflation might support ECB in considering more monetary stimulus to get the economy back on track.
Eurozone, GDP %y/y (3Q12): -0.6%
Previous (2Q12): -0.4% (revised)
Eurozone, GDP %q/q (3Q12): -0.1%
Previous (2Q12): -0.2%
Eurozone, CPI inflation %y/y (Oct): 2.5%
Previous (Sep): 2.6%
Eurozone, Core inflation %y/y (Oct): 1.5%
Previous (Sep): 1.5%