Euro GDP Witnesses Sharpest Fall In Four Years

The struggling Eurozone economy has continued to shrink with another dip in its Gross Domestic Product. The GDP data for the fourth quarter of CY2012 indicates this drop. For the fourth quarter of the last calendar year, the GDP of the 17 member countries (EA17) has shrunk by 0.6% on a sequential basis. On a YoY basis, the GDP drop has widened to 0.9%, the highest in the last 4 years. The overall GDP of 27 countries in Europe has declined by 0.5% on a sequential basis and 0.6% on a YoY basis, indicating very harsh economic conditions in the Europe.

Of the 27 countries in Europe, only a handful of the countries have reported a positive GDP figure, namely the East European countries like Estonia, Latvia, Lithuania, and Romania. Poland has also reported positive GDP numbers, but on a sequential basis there is drop in the GDP. Hence, in the next few quarters, one may see a contraction in the GDP if the conditions in Europe do not show a remarkable improvement.

The unemployment rate in the continent has also been rising. Overall, the unemployment rate has increased from 10.2% in February 2012 to 10.8% in January 2013. Spain and Greece have reported the highest unemployment rates which are running over 25% for 2012. The German economy has held the employment rate at 5.4% for the last four months.

Yesterday, the PMI numbers across a host of the countries were released indicating that the global economy has continued to expand but at a slower pace. The Euro economy PMI numbers however were very disappointing as they have further reported contraction in the private businesses as well as a lowered business confidence. The most important aspect is that the hiring activity has not picked up which indicates that the troubles are further brewing up for Europe. The economists are now expecting a fall in GDP in the first quarter of the current calendar year as well.

The sharpest GDP drop in the last four years has set the stage for further easing of the monetary policy by ECB. Some experts in Europe are also expecting a stimulus package by the ECB. The contraction of GDP in Europe, however, indicates that the recovery in the global economy may take time more than expected.