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Eurozone economic growth stalls
BRUSSELS, Belgium -- The 12-nation eurozone, which is struggling to avoid recession, saw its economy grind to a halt in the first quarter of this year as manufacturing output dwindled and consumer spending declined. While European Union officials say growth among the countries that share a single currency could still see growth in the coming quarter, two of the zone's biggest economies -- Germany and Italy -- already appeared headed toward recession. Growth in the eurozone's gross domestic product was flat in the first three months of 2003 from the previous quarter, the EU statistics office said in a preliminary report Thursday. Eurostat also said year-on-year GDP growth came in a 0.8 percent -- the poorest performance in more than a year. "Unfortunately the data are slightly disappointing, slightly surprising,'' Gerassimos Thomas, European Commission spokesman on economic and monetary affairs, told a news conference in Brussels. But the Commission said it was sticking to its overall forecasts of between zero and 0.4 percent growth in the second and third quarters of this year. The Commission said in a statement forecasts for the third quarter indicate slow growth in both domestic and foreign demand.
"Low confidence in the U.S. and only tentative signs for domestic confidence, among other factors, put a drag on this [third quarter] forecast at this stage," the Commission said in a statement. "As survey data are still blurred by the fog of war at this juncture, an upside risk is associated to this advanced forecast.'' Some economists believe any growth in the eurozone's economy could still a long way off. "The second quarter could be as bad as the first," Elga Bartsh, an economist at Morgan Stanley, told CNN. "I don't see signs of improvement yet... and there will be no recovery in the third quarter." Bartsh said the zone's economy has been hit hardest by a downturn in both domestic and external demand, as consumers cut back on spending and countries outside the bloc reduce their imports. The Eurostat numbers supported early reports Thursday showing the region's biggest economies were continuing to struggle. Germany, Europe's biggest economy, said its GDP shrank 0.2 percent in the first quarter of this year from the previous three-month period. The quarter contraction means the country is close to a technical recession, defined as two successive quarters of contraction. (Full story) Italy, the eurozone's No. 3 economy, saw its GDP contract 0.1 percent in the first quarter -- the weakest performance since the last three months of 2001. (Full story) The two countries together account for almost half of the eurozone's economic output. However, Eurostat is awaiting more national data and could revise its initial first quarter estimate -- the first such estimate it has ever released. "Past experience suggests we can expect on average a revision of plus or minus 0.03 percent,'' a Eurostat official told Reuters. "It depends on official figures that France and Spain are going to publish and any revisions of the published national flash estimates."
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