Weakness Across the Board

Real GDP has declined in all of the European countries shown below for the last quarter of 2012; and, all countries except Germany remain below the level of real GDP five years ago. German real GDP declined after relatively solid growth over the past several years.  Real GDP in Spain and Italy is now actually lower than it was at the depths of the recession in 2009-2010.

Real private consumption expenditures have collapsed in Italy, Spain, and the Netherlands-about 6% below where they were in 2008. Capital formation has also seen a disheartening decline in all countries except the UK. While Germany had seen a comeback in gross capital formation, getting back to its 2008 pre-recession level in the middle of 2011, German capital formation is now 10% below that level.

Despite contracting output across the Eurozone economies, there are no signs of (increased) turmoil in labor markets. The unemployment rate for Germany, Italy, and the UK maintained a slow downward trend. Spain’s unemployment rate decreased for the first time since the peak of the cycle. France and the Netherlands maintained a slow upward trend.

Spending Differences of Government

Government spending in both Italy and Spain have fallen considerably as has the U.S. In most of the other countries government final consumption expenditures continue to rise. However, as a fraction of GDP, government expenditure is approximately flat, except in the U.S., where it is falling and is now below its level since the previous peak.