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The economy of the 17 nations in the euro shrank by 0.6 percent in the fourth quarter, which was worse than forecast.
It is the sharpest contraction since the beginning of 2009 and marks the first time the region failed to grow in any quarter during a calendar year.
It followed news that the economies of Germany, France and Italy had all shrunk by more than expected.
A recession is usually defined as two consecutive quarters of contraction. In the first three months of 2012 the eurozone economy failed to grow, but then in the second quarter of the year it contracted by 0.2 percent and it shrank by 0.1 percent in the third quarter.
The GDP numbers sent the euro lower. It fell to a three-week low against the US dollar of $1.3320.
Carsten Brzeski from ING said: “These are horrible numbers, it’s a widespread contraction, which does not match this positive picture of stabilisation and positive contagion.”
The data make for grim reading. It was the third consecutive contraction in Eurozone GDP, and the fifth in a row that has seen either no growth or decline.
We don’t have figures for all 17 eurozone countries, but of those that are covered only Estonia and Slovakia managed to grow at the end of last year.
Nonetheless, the wider picture is not one of completely unremitting gloom. Industrial production for the end of the period (December) grew, and there have been some more encouraging signs in business surveys this year.
That probably owes much to the improvement in financial markets that followed the European Central Bank’s statements about its readiness to intervene. But even if these really are signs of stabilisation, the eurozone is a long way from either a convincing economic recovery or a solution to its financial crisis.
But he added: “We still expect growth to return in the course of 2013 but any return of growth will be very small which means that the social impact of this recession, especially in the peripheral countries will be still a very severe one.”
Germany, the eurozone’s biggest economy, saw the deepest contraction since the height of the financial crisis as its economy shrank 0.6 percent.
It was hit by a sharp decline in exports.
The German statistics office said: “Comparatively weak foreign trade was the decisive factor for the decline in the economic performance at the end of the year: in the final quarter of 2012 exports of goods declined significantly more than imports of goods.”
The French economy shrank by 0.3 percent in the fourth quarter, while Italy showed 0.9 percent contraction for the period.
There are diverging views on the prospects for the different countries in the region.
Economists remain upbeat about the outlook for Germany.
“This is a temporary period of weakness in the German economy rather than the beginning of a long period of stagnation or even a recession,” said Andreas Rees, chief German economist at the bank Unicredit.
He added: “The outlook is very promising. The chances that the economy will return to growth at the beginning of this year are very good.” — BBC
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