The fall in GDP, which matched a median market forecast, translated into an annualized 3.5 percent fall.
Toronto Globe and Mail - The European Commission has removed all the growth from it latest 2012 economic forecast for the entire European Union, although it has stopped short of predicting a formal recession. The EU’s executive arm now expects the entire 27-country bloc to post a decline in GDP this year of 0.3 per cent, compared with its previous projection of no growth or contraction. Within that group, the 17-member euro zone is forecast to shrink by 0.4 per cent, the first annual decline for the region since the sovereign debt crisis began driving peripheral economies off the rails in 2010.
The commission said the eurozone as a whole would contract by 0.4% this year and grow by 0.1% in 2013. It cut its forecasts for the single currency's "big four" economies – Germany, France, Italy and Spain – as it predicted that unemployment would rise to a fresh peak of 11.8% next year.
The commission expressed confidence that by 2014 the benefits of the austerity programmes would bear fruit, leading to expansion of 1.4%.
Although the UK is expected to grow by just 0.9% next year, Brussels believes it will expand more quickly than any of the major economies of the eurozone. The commission has pencilled in growth of 0.8% for Germany, 0.4% for France, a contraction of 0.5% for Italy and a retrenchment of 1.4% for Spain.
The contagion has taken a firm grip on the stronger core economies of the monetary union. France is expected to report Thursday that third-quarter growth was flat or slightly negative, although Finance Minister Pierre Moscovici is sticking to a slightly more optimistic view based on a manufacturing pickup in the summer months. The figure could indeed be above zero “given the positive surprise” of higher industrial output in July and August, HSBC analysts said in a note.
Germany, Europe’s strongest economy, is also likely to show stable growth of about 0.3 per cent for the quarter, when preliminary GDP numbers are released on Thursday. But the direction for both economies and the rest of the euro zone is down. Since the summer blip, industrial production has fallen sharply in France, Germany and Italy. Industrial output in Germany slid 1.8 per cent in September. French production fell a steep 2.7 per cent, reaching its lowest point since early 2010. Italy posted a decline of 1.5 per cent, underscoring falling export activity across Europe.
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