A number of factors – including budget cuts and concerns surrounding the debt crisis – caused the Eurozone's GDP to decline in the second quarter of 2012.
The 17 nation bloc experienced an economic contraction of 0.2 percent from the first quarter of the year. The figure also represented a 0.4 percent year-over-year drop, although the number is in line with what economists previously predicted in a Bloomberg survey.
Christoph Weil, en economist at Commerzbank AG in Frankfurt, told the news source that this number was relatively easy to predict, given the current climate. He suggested that a true turnaround probably won't occur in the near future.
"It was a broad-based weakness in the second quarter, with cooling global demand curbing exports and uncertainty weighing on investment and employment," Weil said. "The economy will continue to shrink – we're in recession. We can only expect an economic stabilization in 2013 at the earliest."
Not all countries within the Eurozone experienced economic decline, however. According to economists polled by Reuters, Germany – which has not yet posted second quarter numbers – is expected to grow by 0.2 percent in the second quarter, but analysts and economists claim that such a gain will not be enough to reverse the overall contraction. In fact, going forward, many economists agree with Weil's sentiment and, according to Bloomberg, early predictions suggest a 0.2 percent decline may also occur in the third quarter of the year.
Pessimism is still high among Eurozone analysts, but it is important to remember that economic news does not always direct market performance. Financial advisors and investors interested in related ETFs should examine the fundamentals of underlying stocks before investing.
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iShares MSCI Euro Monetary Union (EZU)
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