At a turning point? Assessing the first positive signals for the euro-area economy

The global economy is in the midst of its deepest and most widespread recession since WW II. The euro-area economy has not been spared. It has been in recession since the second quarter of 2008 with the fall in real GDP accelerating to 2.5% quarter-on-quarter (q-o-q) by the first quarter of this year. Compared to a year earlier, the corresponding slump is nearly 5%. The drop in activity has been sharper in some economies, but one important characteristic of this recession is its broad-based nature - not only across countries, but also across demand components. Thus, while countries are exposed to different degrees to the impact of the financial crisis, to the virtual collapse in global trade, to a substantial housing-market correction or to other imbalances, not a single euro-area country remains unaffected. However, recent high-frequency data indicate a certain improvement. This can be seen in some segments of financial markets, in trade data – particularly as regards emerging markets – and to a rebound in confidence in most sectors and economies during the second quarter of this year. This Economic Brief gives a snap-shot of the economic situation at the start of the summer of 2009 in the look out for an economic recovery or, at least, a stabilisation ahead.