2Q GDP: -0.2% q/q, -0.5% y/y (revised from -0.4% y/y)
1Q GDP: flat q/q, flat y/y
4Q GDP: -0.3% q/q, +0.6% y/y (revised from +0.7% y/y)
3Q GDP: +0.1% q/q, +1.3% y/y
–

PARIS (MNI) – Foreign trade gave another boost to Eurozone economic
activity in 2Q, but it was not enough to offset further declines in
private consumption and investment, Eurostat said Thursday, confirming
its flash estimate of a 0.2% downturn in GDP.

On the expenditure side, private consumption contracted for the
third quarter in a row, by another 0.2%, shaving 0.1 point off 2Q GDP
growth. Retail sales fell back 0.6% in 2Q and car sales skidded lower in
most markets. Government spending expanded by 0.1% after +0.2% in 1Q,
but had a negligible impact on GDP.

More worrisome, gross fixed-capital investment dropped 0.8% in 2Q,
deepening the slide during the previous year and cutting 0.2 point from
GDP growth.

Export growth accelerated to 1.3% from +0.7% in 1Q, while imports
bounced back 0.9% after two quarters of decline. As a result, foreign
trade added 0.2 point to GDP growth after a 0.4-point boost in 1Q.

A further drawdown in inventories, linked to the inertia of
domestic demand, sliced 0.2 point from GDP after a 0.1-point drag in 1Q.

On the production side, manufacturing contracted by half a point
after stabilizing in 1Q. Construction was down 0.7%, agriculture and the
services were both down 0.4%, while information and communication
slipped another 0.1%. Manufacturing and the services both trimmed 0.1
point from GDP growth; other sectors had no significant impact.

Germany posted moderate 0.3% quarterly GDP growth, while France
managed to hold activity nearly stable. However, the remaining momentum
of the Eurozone’s locomotive and a few smaller economies was outweighed
by declines in Spain (-0.4%), Italy (-0.7%), Portugal (-1.2%), Belgium
(-0.6%), Finland (-1.1%), Slovenia (-1.0%) and Cyprus (-0.8%).

Quarterly GDP gains were also registered in the Netherlands and
Austria (both +0.2%), Estonia (+0.4%) and Slovakia (+0.7%).

The Eurozone appears to be heading for an extended recession,
during which 1Q brought only temporary relief due to anemic imports.

Leading indicators remain in contraction territory. The PMI
composite indices for July and August averaged 46.4, up only marginally
from the 2Q average. The economic sentiment barometer of the European
Commission sank to a three-year low in August.

Unemployment continues to mount to record highs, even if the pace
has slowed somewhat in recent months. The impact on consumer morale and
spending will only delay the return to economic growth.

The dire situation is reflected in the latest near-term projections
of the OECD, which see German GDP growth contracting by over 0.1% in 3Q
and 0.2% in 4Q. Italy would plunge another 0.7% in 3Q and nearly 0.4% in
4Q. France would slip 0.1% in 3Q and recover only marginally in 4Q. With
Spain and other southern countries also in recession, the outcome for
the Eurozone as a whole would no doubt be worse.

“With the euro area crisis still the most important risk for the
global economy, further policy action is needed to instill more
confidence in the monetary union,” pleaded OECD chief economist Pier
Carlo Padoan in presenting the projections.

While bond market intervention by the ECB may help lower borrowing
costs in countries under market attack, only a quantum leap in Eurozone
integration and regulation appears likely to restore investor
confidence. Even then, the fiscal consolidation demanded in most
countries will remain a drag on domestic demand for years to come.

–Paris newsroom +331 4271 5540; email: ssandelius@mni-news.com

[TOPICS: MT$$$$,M$X$$$,M$XDS$,MTABLE]