Tuesday, November 20, 2012

Euro-area in Double-Dip Recession...Since Q3 2011

At the beginning of the year I outlined Predictions for 2012, which included the following:
3) The Eurozone enters recession - Practically the entire Eurozone falls into recession, including the likes of France and Germany. A deteriorating economic outlook causes deficit estimates to be raised across the board, facilitating credit rating downgrades. Agreements for greater austerity fail to stem the tide and other attempts to kick the can down the road are pursued.
While many sources expected and continue to expect a rebound in growth, I have consistently highlighted weakening data and economic policies that would only depress growth further. Well, according to The Euro Area Business Cycle Dating Committee of the Centre for Economic Policy Research (CEPR), the euro-area is now officially in a new recession. What may surprise many readers is that the recession officially began in the third quarter of 2011. The failure of many economists and other forecasters to acknowledge the probability of a recession that had already begun several months earlier is all too reminiscent of commentary during the first half of 2008. Considering current and proposed policies within the euro-area, I fully expect the recession to continue and likely worsen in 2013.

(Note: Credit ratings downgrades have also come in mass this year with France the most recent recipient, losing its AAA rating from Moody’s yesterday.)

(h/t James Hamilton @ Econbrowser)

Related posts:
ECB's Changing Philosophy is Good for Bond Holders but Bad for the Economy
ECB's Means (Lost Decade With High Unemployment) To An End (Structural Reform)
Europe's Leaders Should Learn From Game of Thrones
Unending Subordination of Private Creditors Continues


  1. It should be noted that different Eurozone economies are undergoing very different trajectories. I'm actually surprised that Italy's economy has been performing even worse than Spain's. But, some countries never really left the recession, so it's not surprising that the Eurozone as a whole is experiencing a double dip.

    1. Clearly there are vast differences within the Eurozone, but thanks for making that point. While I agree the double-dip is unsurprising, most official and expert predictions have consistently held the opposite view. The surprise in my mind is that Germany's GDP has remained marginally positive. As weakness in France and the Netherlands increases, I expect Germany's GDP to turn negative and Eurozone GDP to turn further south.