EU Commission sees Euro-Zone GDP down 1.9%. The updated set of forecasts from the EU commission predicts a contraction in Euro-Zone GDP growth of 1.9% this year, after an estimated rise of just 0.9% in 2008. The Commission estimates that economic activity contracted by 1.5% in the last quarter of the year and sees a further contraction in the first two quarters of this year. The slowdown this year is expected to be driven by a a sharp slump in total investment, weak exports and a slight drop in private consumption, which an expected rise in public consumption of 1.6% will not be able to compensate for. Employment is expected to fall by 1.6%, and the unemployment rate is seen rising to 9.3% this year from 7.5% in 2008. At the same time inflation is expected to average just 1.0% this year, before rising back to 1.8% in 2010. With governments stepping in to support banks and the economy, the overall deficit GDP ratio is expected to rise to 4.0% this year and 4.4% next, that is clearly above the 3% limit laid down in the Maastricht Treaty.
Meanwhile, Euro-Zone November construction output declined 1.1% m/m, after already falling 0.1% m/m in October. Construction production was down 4.7% y/y, after a decline of 4.3% y/y in October. The deterioration reflects the plight of the construction sector and the renewed contraction in November backs estimate of a sharply negative GDP number in the last quarter of 2008. So shortly after the last ECB meeting it does not change the growth and interest rate outlook, however.
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from FXCM.
