It's official - euro countries suffer from shrinking output

By Pan Pylas | July 9, 2009, Thursday |

Print Edition

OFFICIAL figures confirmed that the 16 countries that use the euro saw output shrink by 2.5 percent in the first quarter of 2009 from the previous three month period as the global recession sapped the industrial exports that the euro zone relies on for growth.

Though the final estimate left the quarterly rate unchanged, the annual decline was greater than anticipated. Gross domestic product in the euro zone fell by 4.9 percent in the first quarter compared with the same period in 2008 - slightly more than the previous reading of a 4.8 percent contraction.

Eurostat confirmed that Germany, the euro zone's biggest economy, saw output plunge by a quarterly 3.8 percent as demand for its cars and factory machinery collapsed - its biggest economic contraction since at least 1970, when West Germany started to compile records.

The euro zone has seen output decline for four consecutive quarters. The first quarter slump is the biggest since figures began in 1995, but most analysts think the region is in its worst slump since the end of World War II.

The drop was bigger than the 1.4 percent decline recorded in the United States, which is widely seen as the epicenter of the recession, but less than the 3.8 percent drop recorded in Japan, the world's second-largest economy.

Many analysts argue that the European economy - like Japan's - is too dependent on exports as opposed to domestic demand, and that its policy makers have been slower than their counterparts in the US in responding to the crisis with increased government spending.

A more detailed look at the figures showed that a sharp decline in inventories and investments hit the euro zone hard. In combination, they contributed to 1.8 percent of the 2.5 percent contraction.

Including the 11 countries that are in the EU but not members of the euro zone, such as Britain and Sweden, the quarterly decline was confirmed at 2.4 percent. However, the annual decline was 4.7 percent, more than the 4.5 percent previously estimated.

The biggest quarterly decline was recorded in Slovakia, which saw output slump by 11.4 percent amid falling demand for autos and a January shutoff of Russian natural gas.

Economy

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It's official - euro countries suffer from shrinking output

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