LONDON -- The euro-zone economy contracted in the third quarter as net trade became a big drag on growth and the decline in industrial production accelerated.
European Union statistics agency Eurostat Thursday said that in the three months to the end of September, euro-zone gross domestic product was 0.2% lower than in the second quarter, and 0.6% higher than in the third quarter of 2007.
The quarter-to-quarter growth rate was in line with Eurostat's first estimate, which was released last month. However, the year-to-year rate of growth was revised down from 0.7%. Economists had expected both estimates to be unchanged.
The figures confirm that the euro-zone economy is in recession, with output having contracted in two consecutive quarters for the first time since the currency area was formed in 1999.
The euro-zone economy also contracted 0.2% in the second quarter.
But surveys indicate the contraction has deepened in the fourth quarter, making it increasingly likely that the European Central bank will cut its key interest rate by at least half a percentage point later Thursday.
Eurostat said consumer spending in the 15 countries that use the euro was unchanged from the second quarter, when household expenditure dropped by 0.2%. Investment spending fell by 0.6% from the second quarter, a smaller drop than the 0.9% decline in the second quarter.
Previously a driver of growth, trade became a negative factor for the euro-zone economy in the third quarter. While exports rose by 0.4% from the second quarter, imports rose by 1.7%. As a result, net trade lowered euro-zone GDP by half a percentage point.
On the supply side of the economy, a decline in industrial production was the main source of the contraction. Factory output, including energy supply, fell by 1.4%, having declined by 0.6% in the second quarter.
That alone lowered euro-zone GDP by a fifth of a percentage point. A decline in construction output was balanced by a small rise in the output of consumer services.
There is little prospect of an immediate recovery in economic growth. The Organization for Economic Cooperation and Development Thursday forecast that the euro-zone economy will contract 0.5% in 2009. That is in line with the International Monetary Fund's most recent forecast.
The ECB currently forecasts that the euro-zone economy will grow by between 0.6% and 1.8% next year. It is almost certain to revise that down when it publishes new forecasts after the meeting of its governing council later Thursday.
Germany and Italy are in recession, but France narrowly avoided that fate, its GDP rising by 0.1% in the third quarter. Spain's economy contracted in the third quarter for the first time since 1993, its GDP shrinking 0.2%.
In the EU as a whole, GDP also fell 0.2% to the quarter, and was up 0.8% to the year.
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