Eurocoin Shows Contraction in Euro Zone

Wall Street Journal,

25 November, 2011

LONDON—

The euro-zone economy likely contracted in November for the second-straight month, according to a measure of activity compiled by the Centre for Economic Policy Research and the Bank of Italy.

The CEPR and the Bank of Italy Friday said their Eurocoin indicator fell to minus 0.20% from minus 0.13% in October, the sixth-straight month of decline.

"The fall reflects the further deterioration of most of the variables that are included in the indicator," the CEPR and the Bank of Italy said.

The Eurocoin indicator is intended to estimate quarter-to-quarter growth in gross domestic product, excluding erratic components, such as seasonal variations and short-run volatility.

In the third quarter, the euro-zone economy grew at an unchanged quarter-on-quarter rate of 0.2%. But recent surveys of business activity suggest output is likely to fall in this quarter.

"This is further evidence to suggest that a contraction in GDP is on the cards" in the fourth quarter," said Ken Wattret, an economist at BNP Paribas.

Earlier this month, the European Central Bank cut its key interest rate in an effort to ward off a looming recession, and is likely to act again soon.

Markit Economics Wednesday said the purchasing-managers index for the euro zone rose to 47.2 from 46.5 in October. Despite that increase, the PMI remained below the 50.0 level that distinguishes an expansion from a contraction in private sector output.