The euro-area economy shrank in the second quarter after the worsening debt crisis and tougher budget cuts forced at least six nations into recessions.
Gross domestic product in the 17-nation currency bloc fell 0.2% from the first quarter, when it stagnated, the European Union’s statistics office in Luxembourg said today. That’s in line with the median estimate of 35 economists in a Bloomberg survey. The contraction was softened by stronger-than-forecast growth in Germany, the region’s largest economy.
Europe’s slump is deepening as governments struggle to restore investor confidence and companies eliminate jobs. While Germany’s economy helped to support the euro region in the first half, surveys are weakening, with a gauge of investor confidence dropping in August. The Bank of Japan today cited the euro turmoil among risks to its economy.
Stocks rose after data showed Germany’s economy grew 0.3% in the second quarter and as investors awaited a report that may show U.S. retail sales climbed following a three-month slump. The Stoxx Europe 600 Index gained 0.4%, while Germany’s DAX Index jumped 0.8%. Standard & Poor’s 500 Index futures expiring in September added 0.2%.
The second-quarter expansion in Germany compared with economists’ forecast for growth of 0.2%. While France’s economy stalled for a third straight quarter, that was also better than the 0.1% contraction economists had predicted.
Italy’s economy contracted for a fourth straight quarter, shrinking 0.7%. In Spain, which received external aid earlier this year, GDP dropped 0.4% from the first quarter, when it fell 0.3%. Portugal’s economy contracted 1.2% in that period and Cyprus also remained in a recession.
The statistics office didn’t release quarterly data for Ireland and Malta. Both economies contracted in the first quarter. Greece’s GDP is set to drop for a fifth straight year.
From a year earlier, overall euro-area GDP dropped 0.4% in the second quarter.
Recent indicators suggest the economic slump may deepen in the current quarter. Euro-area services and manufacturing output contracted for a sixth month in July and unemployment held at a record of 11.2% in June. German investor confidence fell to the lowest this month since December 2011.
In a separate report today, the European Union statistics office said that euro-area industrial production fell 0.6% in June from the previous month, when it advanced 0.9%. Economists in a Bloomberg survey had forecast a drop of 0.7%. Output fell 2.1% from a year earlier.
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