Eurozone GDP sunk .2% in the second quarter and is clearly back in recession as a whole. For that matter, the eurozone has been in recession all year if not starting in the final quarter of 2011. Thus I am amused by headlines such as this one from the Financial Times: Eurozone edges back towards recession
The eurozone edged closer towards its second recession in three years after a resilient economic performance from Germany and France failed to prevent the single currency bloc from contracting in the second quarter.
Gross domestic product in the euro area shrank 0.2 per cent in the three months to June, compared with the previous three months when there was no growth, as the economies of Greece, Italy, Spain and Finland contracted sharply.
Robust investment and domestic consumption helped the German economy expand 0.3 per cent in the second quarter, beating expectations of just 0.1 per cent growth, while French GDP remained unchanged avoiding a highly anticipated contraction. The Netherlands also outperformed forecasts, growing 0.2 per cent.
But a 1 per cent fall in economic output in Finland, a close ally of Germany in the battle for greater austerity in Europe, illustrated how the sovereign debt crisis that has been troubling southern Europe is spreading to the bloc’s economically stronger core northern states.
The FT suggested the outperformance of Germany will not last, something I strongly agree with.
Italy, the third largest eurozone economy contracted at .7% quarter-on-quarter and Greece shrank at 6.2% annualized.
Even by a strict definition of two consecutive quarters of negative GDP, does this look like a recession or not?
That chart is going to look a lot worse when Germany and France both decline in a meaningful way next quarter.
Mike “Mish” Shedlock
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