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The Eurozone economy contracted more than initially estimated in the second quarter, putting pressure on the European Central Bank to continue its policy stimulus until the economy gains sustainable growth. But, the pace of decline eased from the first quarter.
Gross domestic product or GDP fell 0.2% sequentially in the second quarter, a downward revision from the 0.1% decline estimated previously, data released by the Eurostat showed Wednesday. Economists had forecast the final figure to match the initial estimate. GDP continued the stretch of fall that began in the second quarter of 2008. In the first quarter, the economy had shrunk 2.5%.
According to the revised report, private consumption grew 0.1% in the second quarter, slower than the 0.2% growth initially reported. Government expenditure rose 0.7%, better than the 0.4% increase estimated earlier. Meanwhile, declines in investment was revised downward to 1.5% from 1.3%, exports to 1.5% from 1.1% and imports to 2.9% from 2.8%.
On an annual basis, the 16-nation economy contracted 4.8% in the second quarter after shrinking by 4.9% in the first three months. Earlier, the statistical agency had reported a 4.7% annual fall in GDP.
However, there are increasing signs that the Eurozone economy is on the road to recovery. In September, the region's service sector activity grew for the first time in sixteen months, while the manufacturing sector is likely to recover in the coming months. Economic sentiment in September was highest in a year and investor confidence improved in October. But, unemployment rose to a decade-high in August.
Positive readings of economic indicators suggest that the economy of sixteen nations has stabilized currently. Ireland's central bank said Tuesday that the euro area economy has broadly stabilized and may expand modestly in the second half of the year.
In September, chairman of the euro group of nations, Jean-Claude Juncker, also shared the same view adding that the situations remains fragile. According to an interim forecast by the European Commission, Eurozone would grow 0.2% in the third quarter and by 0.1% in the fourth quarter.
The ECB is widely expected to leave its key interest rate unchanged at a record low of 1% for the fifth month in a row. The Governing Council is set to hold its meeting on Thursday.
The Eurostat report also said GDP for EU27 dropped 0.3% sequentially, revised down from a 0.2% fall reported previously. Year-on-year decline was revised to show a decrease of 4.9% versus 4.8% recorded earlier. In the previous quarter, the economy had contracted 2.4% quarter-on-quarter and 4.8% over the previous year.
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