Eurozone hits first recession as Q3 shrinks 0.2%

14 November 2008 13:50  [Source: ICIS news]

LONDON (ICIS news)--The 15-nation eurozone has fallen into recession for the first time, with GDP dropping 0.2% in the third quarter after a similar fall in the previous quarter, according to data released by the EU on Friday.

GDP in the 27-nation EU also fell 0.2% in the third quarter after it was flat from the previous three-month period in the second quarter, according to official statistics from Eurostat.

The definition of a recession is two consecutive quarters of falling GDP.

Year on year, the eurozone economy grew 0.7% in the third quarter on a seasonally adjusted basis, down sharply from 1.4% in the previous quarter, Eurostat said.

The announcement confirmed earlier concerns that the currency bloc had fallen into recession for the first time since it was formed in 1999.

The news also came after official figures from German federal statistics agency Statistisches Bundesamt released on Thursday showed that the country’s economy shrank again in the third quarter, pushing Europe’s biggest economy officially into recession.

The Eurostat figures also showed Italy had fallen into recession with a 0.5% fall in GDP for the third quarter, while France narrowly escaped with growth of a mere 0.1% in July-September after a 0.3% fall in the second quarter.

The euro area includes Belgium, Germany, Ireland, Greece, Spain, France, Italy, Cyprus, Luxembourg, Malta, the Netherlands, Austria, Portugal, Slovenia and Finland.

Outside the eurozone, the UK economy fell 0.5% in the third quarter, but has not yet officially fallen into recession as growth was flat in the second quarter, according to Eurostat.

The effect of the recession on consumer and company spending has been felt in the chemicals industry over the past month, with demand collapsing, prices dropping and companies cutting production rates.

On the upside, Eurostat figures released on Friday showed that inflation in the eurozone continued to fall.

In October, inflation in the currency bloc was 3.2%, down from 3.6% in September and at a nine-month low, while in the EU 27 it was 3.7%, down from 4.2% a month earlier.

Consumer prices have thus fallen for the third consecutive month after inflation hit a record 4% in June and July on the back of a surge in oil prices.

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Author: Hilde Ovrebekk
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