March 6, 2013 / 11:21 AM / 5 years ago

UPDATE 1-No Christmas boost for euro zone in fourth quarter

* Economy shrinks 0.6 percent in Q4, quarter-on-quarter
    * Economy contracts 0.9 percent year-on-year, Eurostat says

    By Robin Emmott
    BRUSSELS, March 6 (Reuters) - Falling investment and
consumers' reluctance to spend even at Christmas were behind the
euro zone's slide deep into recession in the last three months
of 2012, according to a second official estimate on Wednesday.
    Economic output from the 17 nations sharing the euro fell
0.6 percent in the fourth quarter of 2012, EU statistics agency
Eurostat said, confirming an earlier reading and giving a more
detailed breakdown.
    "This was the worse quarter in the recessionary cycle," said
Mads Koefoed, an economist at Saxobank. "The outcome of the
Italian election increases uncertainty, but euro zone growth
should come back towards the end of this year," he said.
    The data pointed to the vicious circle at the centre of the
euro zone's economic malaise. Governments are cutting spending,
prompting businesses to freeze investment and lay off staff, in
turn leaving households in no state to spend or provide the
growth needed to reduce debt.
    While backward-looking, the numbers may also influence a
monthly meeting of the European Central Bank's Governing Council
on Thursday.
    The bank is not expected to cut rates this week to below
0.75 percent, but a growing number of economists see a reduction
in the cost of borrowing at some point this year, partly because
inflation is no longer a threat in the euro zone.
    The euro zone's economy is expected to shrink 0.3 percent
this year, the European Commission says, and at least for the
first and second quarters of 2013, the outlook remains poor.
    Complicating matters, business surveys released on Tuesday
highlighted the divide between Germany and the rest of the bloc.
    The details of the GDP numbers showed Germany was the only
major euro zone economy to grow in the fourth quarter, although
growth slowed to a crawl, while France, Spain and Italy all
    Overall, government spending made no contribution to gross
domestic product in the final quarter of 2012.
    A lack of spending by households shaved 0.2 percentage
points from the quarterly GDP figure, and business investment
also dragged down output by the same margin.
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