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Euro-Zone Economy Marks the Sharpest Decline Since 1995
Friday, 13 February 2009 09:11:07 GMT  |  DailyFX Research
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Euro-Zone Q4 GDP contracted 1.5% q/q, in line with our forecast but below our median of -1.3% q/q, which was in line with Bloomberg consensus. Weaker than expected numbers from France, Italy and Germany for the fourth quarter of last year already indicated a disappointing number and the quarterly contraction was the sharpest since the start of the series in 1995. Growth was down 1.2% y/y, the first annual decline registered since the start of the series. The ECB already indicated that it is all set to cut the refi rate again at the next meeting and the sharp contraction in Q4 coupled with sharply falling inflation and a marked downward revision to inflation expectations for 2010, as reflected in the ECB's survey of professional forecasters, supports arguments for a 50 bp cut. Forward looking indicators point to at least 2 more quarters of negative growth ahead but most recent PMI figures could herald a stabilization in H2. Still, overall economic activity is set to contract by at least 2.1% this year.

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