Euro Zone Economy Shrank

Euro zone economy contracted in the fourth quarter on the back of declining investment, decreasing exports and consumer spending.

The EU’s statistics office announced today that gross domestic product decreased 0.3 percent from the third quarter, which was in line with an initial estimate published in February. Exports fell 0.4 percent after a 1.4 percent gain in the previous three months. Household spending declined 0.4 percent and investment dropped 0.7 percent, the biggest drop since 2009.

Europe is facing its second recession in less than three years, however, according to the ECB, there are some signs of stabilization in the economy.

The ECB’s two liquidity operations took total long-term lending to above 1 trillion euros, and has helped reduce the risk of a credit crunch, allowing governments time to come up with measures to address the debt crisis. Some economists say that the ECB’s cash injections and government progress on solving the crisis in the euro zone economy should boost growth from the second half of this year.

According to the EU’s commission forecast, the 17-nation economic output may decrease 0.3 percent this year, driven by a contraction of 1.3 percent in Italy and 1 percent in Spain. German economy is expected to grow 0.6 percent.

Source: Bloomberg

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Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.