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| Economy in Europe Contracts More Than Expected | |
| (35 minutes later) | |
| FRANKFURT — Economic output in the euro zone shrank more than expected in the fourth quarter of 2012, according to official data published Thursday, as Germany and France were caught up in a slump that was already well underway in countries like Spain and Italy. | FRANKFURT — Economic output in the euro zone shrank more than expected in the fourth quarter of 2012, according to official data published Thursday, as Germany and France were caught up in a slump that was already well underway in countries like Spain and Italy. |
| The euro zone economy contracted 0.6 percent compared to the previous quarter, the third decline in a row. Except for the second quarter of last year, when growth among the 17 members of the currency union was zero, the euro zone has effectively been in recession since 2011. | The euro zone economy contracted 0.6 percent compared to the previous quarter, the third decline in a row. Except for the second quarter of last year, when growth among the 17 members of the currency union was zero, the euro zone has effectively been in recession since 2011. |
| Among all 27 members of the European Union, including countries like Britain or the Czech Republic that are not part of the euro zone, economic output fell 0.5 percent. | Among all 27 members of the European Union, including countries like Britain or the Czech Republic that are not part of the euro zone, economic output fell 0.5 percent. |
| Economists had been expecting the downturn in the euro zone to end soon, but the figures published Thursday may signal that the recovery will take longer than they had thought. The euro fell by nearly a cent against the dollar in early trading Thursday as investors reassessed the prospects for growth. | Economists had been expecting the downturn in the euro zone to end soon, but the figures published Thursday may signal that the recovery will take longer than they had thought. The euro fell by nearly a cent against the dollar in early trading Thursday as investors reassessed the prospects for growth. |
| “While we expect a stabilization in the first quarter and a weak recovery from the second quarter onwards, one has to acknowledge that a lot of things still can go wrong,” Peter Vanden Houte, an economist at ING Bank, said in a note to clients. | “While we expect a stabilization in the first quarter and a weak recovery from the second quarter onwards, one has to acknowledge that a lot of things still can go wrong,” Peter Vanden Houte, an economist at ING Bank, said in a note to clients. |
| Total output in the euro zone remains 3 percent below its level in 2008, when the financial crisis began, Mr. Vanden Houte said. | Total output in the euro zone remains 3 percent below its level in 2008, when the financial crisis began, Mr. Vanden Houte said. |
| Hopes for a quick recovery had been raised by an increase in euro zone industrial production during December. That data, along with surveys of business sentiment, suggested that economic activity was picking up as businesses and consumers became less afraid that the euro zone will break up under the stress of its debt and banking crisis. | Hopes for a quick recovery had been raised by an increase in euro zone industrial production during December. That data, along with surveys of business sentiment, suggested that economic activity was picking up as businesses and consumers became less afraid that the euro zone will break up under the stress of its debt and banking crisis. |
| A decline for the bloc as a whole during the fourth quarter was inevitable after its two largest economies contracted. Data published earlier Thursday showed that the German economy declined 0.6 percent during the last quarter of 2012, the most in three years. German exports fell and companies invested less in new equipment, according to official figures. | A decline for the bloc as a whole during the fourth quarter was inevitable after its two largest economies contracted. Data published earlier Thursday showed that the German economy declined 0.6 percent during the last quarter of 2012, the most in three years. German exports fell and companies invested less in new equipment, according to official figures. |
| The French economy, the second largest in the euro zone, fell 0.3 percent in the fourth quarter, as major employers like carmaker PSA Peugeot Citroën suffered from plunging demand in important markets like Spain and Italy. | The French economy, the second largest in the euro zone, fell 0.3 percent in the fourth quarter, as major employers like carmaker PSA Peugeot Citroën suffered from plunging demand in important markets like Spain and Italy. |
| Meanwhile, the recession in Italy deepened as output fell 0.9 percent, also more than expected. Italian consumers are too uncertain about the future to spend, while big employers like automaker Fiat are suffering from slack domestic and foreign demand. | Meanwhile, the recession in Italy deepened as output fell 0.9 percent, also more than expected. Italian consumers are too uncertain about the future to spend, while big employers like automaker Fiat are suffering from slack domestic and foreign demand. |
| Germany had continued to defy the recession in the euro zone as a whole during the first nine months of last year, benefiting from exports to countries outside the euro zone. The decline in the fourth quarter was an illustration of Germany’s vulnerability to the fortunes of its neighbors. And it was bad news for Europe as whole, because the relatively strong German economy had been compensating for weakness in France and other countries. | Germany had continued to defy the recession in the euro zone as a whole during the first nine months of last year, benefiting from exports to countries outside the euro zone. The decline in the fourth quarter was an illustration of Germany’s vulnerability to the fortunes of its neighbors. And it was bad news for Europe as whole, because the relatively strong German economy had been compensating for weakness in France and other countries. |
| “Not only the ‘usual suspects’ Spain and Italy showed negative growth, but also Germany, France and the Netherlands,” Mr. Vanden Houte said. “The outlook for 2013 remains subdued.” | “Not only the ‘usual suspects’ Spain and Italy showed negative growth, but also Germany, France and the Netherlands,” Mr. Vanden Houte said. “The outlook for 2013 remains subdued.” |