Plunging inventories and private investment kept the euro zone in recession in the second quarter, data confirmed today, but with the worst seemingly over, growth is seen resuming in the third quarter.
The European Union statistics office Eurostat confirmed its earlier estimate that the gross domestic product of the 16 countries using the euro fell 0.1 per cent quarter-on-quarter after a 2.5 per cent drop in the first three months of 2009.
"The worst is over for the time being," the chairman of euro zone finance ministers, Jean-Claude Juncker, told reporters before talks in Brussels among his Eurogroup colleagues and the European Central Bank.
Second-quarter GDP was 4.7 per cent lower than a year earlier, after a 4.9 per cent fall in the first quarter.
"Shrinking times are over and the recovery can set in," said Carsten Brzeski, economist at ING. "The recent data inflow indicates that the euro zone as a whole should leave technical recession in the third quarter."
A plunge in inventories was the single biggest negative factor in the second quarter, subtracting 0.7 percentage point from the overall quarterly result. A fall in private investment took away another 0.3 percentage point.
But government efforts to support the economy with fiscal stimulus clearly bore fruit.
Household consumption and government spending added 0.1 percentage point each to the final outcome and trade contributed 0.7 percentage point as imports fell much more than exports.
"We had a small increase in consumption, so consumers probably benefited quite a bit from the scrapping bonuses for new car purchases," said Juergen Michels, economist at Citigroup.
"And on top of that we also have an expansion of government expenditure, so this helped to limit the contraction in GDP in the second quarter," he said.
The euro zone's two biggest economies, Germany and France, returned to growth in the April-June period, but the sustainability of the euro zone recovery remained uncertain.
Depleted inventories will have to be rebuilt, boosting production, while some economic revival globally is likely to boost demand for euro zone exports.
Reuters