For the second quarter in a row, the euro zone recorded a 0.2% decline in its GDP, officially moving the 15-member group into a recession, according to Eurostat, which on the other hand signalled a continuing positive trend of downward inflation for October.
In the period between July and September 2008, the 15 economies of the euro area recorded an aggregate 0.2% fall in their GDP. This is the same result as the second quarter of the year, meaning economists are now describing the downturn a technical recession.
Germany, considered the driver of the eurozone economy, recorded a decline of 0.5% in its GDP, the same figure as Italy. France recorded lukewarm growth of 0.1%, while the Spanish economy declined by 0.2%. Outside the euro zone, the UK recorded -0.5% in the third quarter. The worst figure was for Estonia (-1%), while the best performer was Slovakia (+1.5%). The EU 27 as a whole saw a 0.2% fall in total GDP in the third quarter, the first decline since the 2004 enlargement.
Eurostat’s estimates match the gloomy forecasts published by the European Commission at the beginning of November, when the EU executive halved its expected eurozone growth for 2008 to 1.2% and signalled a further decline in 2009, when the aggregate yearly figure for GDP growth is expected to be 0.1% (EURACTIV 03/11/08).
Eurostat also published figures today (14 November) concerning inflation and reported a drop to 3.2% in the euro zone in October in comparison to September, when inflation was at 3.6%. In the EU 27 as a whole, inflation fell from 4.2% in September to 3.7% in October.
This confirms the downward trend in prices which began last summer after a peak of 4% reached in July. Nevertheless, the rate remains well above the 2% target set by the European Central Bank (ECB).
The current recession is forcing the ECB to cut interest rates to help the economy to recover, which could make the fight against inflation less successful in the coming months.