European Economy Expanded Less Than Initially Estimated in Third Quarter

Europe’s economy expanded less than initially estimated in the third quarter as companies trimmed spending to weather the region’s worsening debt crisis.

Gross domestic product in the euro region rose 0.3 percent from the second quarter instead of 0.4 percent reported on Dec. 2, the European Union’s statistics office in Luxembourg said today. Investment was revised from being unchanged to a 0.3 percent decline. A separate report showed the jobless rate held at 10.1 percent in November when adjusted for seasonal swings, the highest in more than 12 years.

Europe’s economy has been reliant on exports as the region’s sovereign-debt crisis prompted countries from Spain to Italy to step up austerity measures, hurting consumer demand and forcing companies to pare costs. MAN SE, Europe’s third-largest maker of commercial vehicles, said on Dec. 17 it expects to maintain its sales growth on demand from emerging markets.

“So far, the situation looks relatively good,” said Juergen Michels, chief euro-region economist at Citigroup Inc. in London. “That means we’ll see moderate growth going forward. 2011 will be a rather difficult year overall with a strong development in Germany and weak growth in peripheral nations.”

The euro was little changed against the dollar after the report, and traded at $1.2990 as of 10:07 a.m. in London from $1.3003 yesterday.

Consumer Spending
Consumer spending increased 0.1 percent in the third quarter, down from a 0.3 percent estimate in the Dec. 2 report. Government spending rose 0.4 percent in the quarter, exports increased 1.9 percent and imports rose 1.5 percent.

Germany continued to fuel euro-region growth in the third quarter, expanding 0.7 percent from the second quarter, when it grew 2.3 percent, today’s report showed. The French and Italian economies both expanded 0.3 percent. Ireland, which had the euro area’s highest budget shortfall in 2010, had a GDP increase of 0.5 percent, Spain’s economy stalled and Greece’s economy contracted 1.3 percent.

From a year earlier, euro-area GDP increased 1.9 percent, after increasing 2 percent in the second quarter, today’s report showed. That’s in line with the Dec. 2 estimate. The report also showed the U.S. economy grew 0.6 percent in the third quarter from the previous three months, based on an EU measure.

The European Central Bank in December forecast that the euro region economy expanded about 1.7 percent in 2010. Estonia this month became the 17th nation to join the currency area and the ECB Governing Council holds its first interest-rate meeting of the year in Frankfurt on Jan. 13.

To contact the reporter on this story: Simone Meier in Zurich at smeier@bloomberg.net

To contact the editor responsible for this story Craig Stirling at cstirling1@bloomberg.net