Eurostat released quarterly figures on Euro area GDP today. According to the data, GDP for 2012Q3 was down 0.1% compared to the previous (2012Q2) quarter. Unfortunately, if one compares the figures to the same quarter of the previous year, the outcome is quite different since the relevant data show that the Eurozone has been in a recession during the whole of 2012 with drops in GDP increasing by quarter. It is also clear that most of the Eurozone countries are in recession since at least 2012Q2 with the exception of Germany (which shows quarterly growth of ~1.0%) and France (which has more or less zero growth):

gdp per quarter

* I will only use figures compared to the same quarter of the previous year for the reminder of the post.

Looking at GDP components more closely it is clear that any growth is the result of net exports. Household consumption is negative at -1.0% per quarter, government consumption slightly negative (at -0.1%) and gross fixed capital formation strongly negative (with an increasing negative trend) since 2011 (at -4.2% in 2012Q3). Exports on the other hand show a healthy increase of more than 2.5% per quarter while import growth is negative (around -1.0%) contributing as well to stabilizing GDP:

expenditure components

This is more evident when looking at the contribution of each expenditure component. Final consumption contributes around -0.6% while gross fixed capital formation and changes in inventories are strongly negative, both around -0.8%. As a result, total internal demand contribution was -2.2% in 2012Q3 pointing to deep recessionary forces. Only lower imports (-0.4%) and strong external demand (+1.3%) were able to balance total demand to much lower levels.


In terms of gross value added, all sectors are now in negative territory, especially industry (including manufacturing) and construction:

gross value added per industry

The downturn in Eurozone internal demand is quite clear and does not really show any signs of stabilization, rather acceleration. It is rather strange that the second largest economic block in the world is looking into external demand in order to avoid a deep recession. Since this is based on increasing net exports (the Euro current account moved from -0.1% to +0.8% GDP for the 12-month period ending on September 2012) which act as a demand leakage (for the rest of the world), the Eurozone will be a drag on global growth in the near future.