Eurostat confirms Q4 eurozone contraction

The eurozone economy contracted in the fourth quarter of 2011 after investment and exports plummeted, the latest official figures confirm.

A second estimate by European Union (EU) statistical office Eurostat shows eurozone GDP fell by 0.3% in the last three months of 2011 when compared with the previous quarter.

The estimate has been left unrevised from the preliminary figure given last month. Eurostat also says the EU saw economic activity contract by 0.3% in the fourth quarter.

Eurostat’s figures show that investment declined by 0.7% over the three months, while exports dipped 0.4%. Household spending also fell by 0.4%.

The data also confirms that the recessions in Portugal and Greece deepened over the three-month period, while Italy went into recession. Although activity strengthened in France, contraction was seen in Germany – the bloc’s largest economy. (article continues below)

Howard Archer, chief UK and European economist at IHS Global Insight, says: “Despite some recent overall improvement in eurozone surveys and evidence that Germany is returning to growth, we doubt that the eurozone will be able to avoid further contraction in the first quarter of 2012 and very possibly the second.”

The news comes after economic data published yesterday showed eurozone business activity contracted in February and raised fears that the region is headed back towards recession.

The Markit eurozone composite output purchasing managers’ index stood at 49.3 in February, down from 50.4 in January and driven by renewed decline in service sector activity.

Chris Williamson, chief economist at Markit, says: “With business activity falling again in February… it remains a close call as to whether the eurozone contracted for a second successive quarter, sending the region back into recession.”