Eurozone economy still contracting, but only just

The combined economy of the 16-nation eurozone shrank in the second quarter, with a 0.1 per cent contraction compared to the first three months of 2009, largely due to lower investment, official EU statistics showed yesterday.

The contraction confirmed an earlier Eurostat estimate released on August 13 and marked the fifth consecutive quarter of falling economic output for the area.

But the pace of decline is nearing standstill when compared to a record 2.5 per cent decline when the recession first bit.

Despite record unemployment running to more than 15 million people, coming on top of 0.3 per cent growth recorded by both France and Germany, the area's largest economy, the latest figures underline rising optimism that Europe's worst post-war recession is coming to an end.

Compared to the corresponding quarter of 2008, gross domestic product for the eurozone retreated by 4.7 per cent, as against 4.9 per cent between the first quarters of 2008 and 2009. The contraction is slightly larger than the initial estimate of 4.6 per cent.

For the 27-nation EU as a whole, GDP fell by 0.2 per cent over the second quarter, a slight improvement on the 0.3 per cent estimate first given. The annual rate of decline was 4.8 per cent.

Investment was down 1.3 per cent in the eurozone and 1.7 per cent across the 27-nation bloc, the agency added. Again, that marked a vast improvement on the picture for the first quarter, which saw 5.3 per cent and 5.7 per cent drops respectively.