Some Brussels officials may take a glass-half-full view of new figures, but there is good reason to be gloomy
It's official. The eurozone has entered a double-dip recession after recording a 0.1% contraction in the third quarter of 2012.
Some officials in Brussels might argue that the outcome, all things considered, is not that bad. The decline was smaller than expected and the single currency's big two economies – Germany and France – both grew by 0.2%. Austerity was bound to exact a price but the price is proving bearable.
The serious unrest that swept across Europe on Wednesday provides one counter to the glass-half-full way of looking at things. The fine print of Thursday's data offers a second reason to be less sanguine. The grim prospects for the fourth quarter of 2012 and beyond are a third.
Clearly, parts of the eurozone are suffering grievously from slow growth, frighteningly high levels of unemployment and falling living standards. The fact that eurozone GDP still fell even when Germany and France were growing indicates that activity was falling quite fast in some of the smaller economies. The problems of Greece, Spain, Portugal and Italy have been well documented; the worry in Thursday's numbers was that "core" countries like Austria and the Netherlands saw their economies shrink in the third quarter. For Angela Merkel and François Hollande, the worrying message from the data is that the contagion is spreading from the periphery to the core.
What's more, all the signs are that the downturn is intensifying in the final three months of the year. So far this year, the eurozone has been gently declining rather than collapsing. There was no growth in the first quarter, a 0.2% drop in GDP in the second quarter, and now a 0.1% fall in the third quarter. Analysts think the fourth quarter will see a decline of 0.5%, with a strong chance that both Germany and France will go backwards.
Nor are the prospects much brighter for next year. Greece has just signed up to another batch of spending cuts, the Spanish economy is in freefall and Germany will continue to struggle all the while world trade remains weak. European banks remain in a parlous state and would go under without life support from the European Central Bank and national governments. The first half of 2013 will be grim.
Britain is not in the eurozone but, as Sir Mervyn King noted on Wednesday, events on the other side of the Channel are stifling recovery. The Bank of England's view that the UK economy will contract in the fourth quarter was supported by the unexpectedly poor figures for high street sales in October, an indication of the pressures on discretionary spending.
In past years, consumers have tended to tighten their belts in October and November before having a splurge just before Christmas, when jittery retailers cut prices to shift stock, so it is premature at this stage to assume that there will be falling output in the final three months of 2012, let alone two consecutive quarters of negative GDP over the winter that would constitute a triple-dip recession. But the desperate state of the eurozone economy makes a third leg to the UK slump a real possibility. You would not want to bet against it.