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shrinking more than expected, giving substance to widespread warnings
that talk of a rapid global turnaround might be overdone. But the
surprise revised results also showed some countries emerging from
recession. The increasingly upbeat mood accompanying results since
the summer was punctured by EU data showing that the economy of the
16- nation eurozone shrank in the second quarter by a greater margin
than initially thought. Gross domestic product down by 0.2 per
cent compared to the first three months of the year—and twice the
initial estimate—was reflected across the 27-nation EU as a whole,
where the fall was 0.3 per cent. Ireland's battered economy
produced returned to break-even point after steep contraction and
the Czech Republic achieved 0.1 per cent growth after shrinking by a
massive 4.8 per cent in the first quarter of 2009 — offering relief
to political leaders seeking to pressure Prague into signing the
long- delayed Lisbon Treaty, Greece, Poland and Portugal also
returned to growth, and the EU's Eurostat agency's second estimate
for Britain also showed a slight improvement predicting a
contraction of 0.6 per cent. But the annual rate of decline also
crept back upwards to 4.8 per cent with the fifth quarter running of
falling economic output for the area. Global financial leaders
have been at pains in recent weeks to warn that recovery from the
global crisis is likely to be uneven and unsteady, and that for most
people will be masked by a rise of unemployment figures in leading
industrialised countries. This tempering of signs that recovery is
under way was echoed at the annual meetings of the International
Monetary Fund and World Bank in Istanbul this week. The revised
eurozone figure 'does not materially change the picture,' said chief
IHS Global Insight analyst Howard Archer, referring to marked
improvement on the record 2.5-per cent plunge in the first three
months of the year. 'It still seems likely that the region
returned to growth in the third quarter, albeit modest,' he added.
'Government spending and significantly positive net trade were the
major factors in limiting the rate of contraction, while consumer
spending edged up. 'We expect eurozone GDP to have grown by
around 0.3 per cent quarter- on-quarter in the third quarter.
'Nevertheless, serious doubts remain about longer-term eurozone
growth prospects given high and rising unemployment, still
significant financial sector problems and a reluctance of banks to
lend.' He said more 'pressure on governments to withdraw fiscal
stimulus as soon as possible and then tighten fiscal policy
significantly in order to rein in ballooning public deficits' was
required. Nine more EU countries were hammered on Wednesday by the
European Commission for deficits Brussels says are spinning out of
control. Given record unemployment running to more than 15 million
people, the data tempers somewhat optimism that Europe's worst
post-war recession is coming to an early end. For the entire
27-nation EU, GDP fell 0.3 per cent in the second quarter, slightly
worse than the 0.2 per cent estimate first given. The annual rate of
decline was 4.8 per cent. Exports fell by 1.5 per cent in the
eurozone and 1.7 per cent across the EU, again worse than
anticipated. Domestic consumption rose 0.1 per cent in the
eurozone, a slight drop from the previously-released data but still a
sharp improvement after a slide of 0.5 per cent in the first quarter.
Analysts expect the European Central Bank to keep its benchmark
interest rate at its historic low of 1.0 per cent on Thursday as
deflation fears subside and the 16-nation economy shows signs of
recovery.
