Courtesy of Mish.
As expected in this quarter (but not by economists) eurozone economies contracted at the sharpest rates in four years with Germany, France, and Italy falling short of consensus estimates.
The eurozone consensus was .4%. The 17-nation bloc shrank at .6% quarter-on-quarter while the broader 27-nation bloc shrank .5% quarter-on-quarter.
From the above Financial Times link:
Germany and France, the eurozone’s two biggest economies, both saw output shrink. German GDP shrank 0.6 per cent in the period while France contracted 0.3 per cent compared with the previous three months. Both were marginally worse than the consensus forecasts of 0.5 per cent and 0.2 per cent respectively.
Italy’s economy shrank 0.9 per cent, also more than expected, and its sixth consecutive fall. Both Dutch and Austrian GDP also contracted. The figure for the wider EU – all 27 member states – was a fall of 0.5 per cent.
The steep German decline reflected a sharp drop in net exports and investment in plants and machinery. Although business surveys have been much more upbeat, the weakness underscores how the recent appreciation of the euro could threaten an export-led recovery.
Insee, France’s national statistics agency, said manufacturing output fell 2.3 per cent in the fourth quarter after a 0.9 per cent rise in the third quarter.
Spotlight on Germany
The Financial Times noted “the contraction in Germany is widely expected to be shortlived.” I believe otherwise.
Italy remains a basket case, and the French economy is seriously imploding (for details, please see France Economic Implosion Accelerates; Record Decrease in Service Employment in Italy
Precisely what is supposed to carry the German economy to strong growth?
Expect ECB Jawboning
One like consequence of this “unexpected” news is the ECB is highly likely to start jawboning about the “unwelcome strength of the euro”, hoping to talk the exchange rate lower without the ECB having to take any action. When that fails to work, the ECB will cut rates….
