Weak growth may prompt rate cut

Tuesday 06 December 2011 10.36
Euro zone business investment flat again
Euro zone business investment flat again

Official figures show that the euro zone's economy barely grew in the third quarter, with collapsing business confidence and slowing industry pointing to a recession.

The figures could give the European Central Bank grounds for an interest rate cut this week.

Growth in the 17 countries sharing the euro was just 0.2% from July to September, the EU's statistics office Eurostat said in its second estimate. Growth was also 0.2% in the second quarter.

Household spending and exports kept the euro zone's economy in positive territory in the third quarter, adding 0.2 percentage point and 0.6 percentage points respectively to the final outcome.

But in a sign of the evaporating confidence at factories and businesses, investment was flat for the second quarter running and companies sold down inventories, which subtracted 0.2 percentage points from the quarterly figure.
Imports took away another 0.4 percentage points.

For many economists and the ECB, which cut rates by a quarter-point to 1.25% in November, a recession is all but a certainty, as the euro zone's debt crisis drags the economy down.

Many investors and economists are divided on just how deep the contraction will be, but most expect the ECB to cut rates again to 1% on Thursday to try to boost the economy.