June 2014 - Euro Area Mired in Recession Pause

The CEPR Euro Area Business Cycle Dating Committee, which is composed of nine CEPR researchers, establishes the chronology of recessions and expansions of the eleven original euro-area member countries plus Greece for 1970-1998, and of the euro area as a whole from 1999 onwards.

The Committee met in London on 11 June 2014 to examine recent data developments and released its Findings on 16 June. 

The Committee observed that since early 2013 the euro area has witnessed a prolonged episode of extremely weak growth in economic activity: Euro area GDP has risen by less than 1% from 2013Q1 to 2014Q1 and labour markets have shown little change over that period. Had the improvement in economic activity been more significant, it is likely that the Committee would have declared a trough in the euro area business cycle in early 2013, most likely in 2013Q1. The lack of evidence of sustained improvement of economic activity in the euro area does, however, preclude calling an end to the recession that started after 2011Q3. Rather, consistent with the concerns expressed by the Committee at its October 2013 meeting, the euro area may be experiencing since early 2013 a prolonged pause in the recession that started after 2011Q3. 

The decision of the Committee not to call an end the recession that started after 2011Q3 in spite of several quarters of positive (but weak) economic developments in the euro area illustrates that its identification of peaks and troughs does not follow a mechanical two-quarter rule for GDP (see FAQ).The Committee indeed assesses both the length and the strength of improvements in economic activity to document the sustained growth that it requires to call the end of a recession. The decision of the Committee does not reflect a negative forecast by the Committee of future growth prospects for the euro area, since the Committee does not forecast (see FAQ).

The Committee had previously met in Paris on 9 October 2013. The decision of the Committee to convene was prompted by positive news stemming from a variety of sources (the European Commission, statistical agencies, forecasting institutions, international organizations, NowCasting.com) about economic activity in the euro area. The objective of this meeting was to determine whether there was enough evidence that the decline in economic activity that started after third quarter of 2011 had ended. The Committee decided that, while it is possible that the recession ended, neither the length nor the strength of the recovery is sufficient, as of 9 October 2013, to declare that the euro area has come out of recession. The Committee released its findings on 19 October. 

The Committee had declared on 15 November 2012 that economic activity in the euro area had peaked in the third quarter of 2011 and that the euro area had been in recession since then. The third quarter of 2011 marked the end of an expansion that began in the second quarter of 2009 and lasted 10 quarters. Although output increased 4.03 per cent from trough to peak, this was not enough to bring euro-area GDP back to its pre-financial crisis level: at the end of the expansion in 2011Q3, GDP was about 2% below its previous 2008Q1 peak. You can read the 15 November Press Release here and the corresponding Findings here.

Previous announcements of the Committee can be found here.

You can find a discussion of the methodology used by the Committee here, the sources of its data here, and frequently asked questions (FAQs) here

Chronology of Euro Area Business Cycles

The Committee has identified nine peak and trough quarters since 1970:

Table 1. Peaks and Troughs

Date Peak/Trough Announcement Date Findings
2011Q3 Peak 15 November 2012 Available here
2009Q2 Trough 4 October 2010 Available here
2008Q1 Peak 31 March 2009 Available here
1993Q3 Trough 22 September 2003 Available here
1992Q1 Peak 22 September 2003 Available here
1982Q3 Trough 22 September 2003 Available here
1980Q1 Peak 22 September 2003 Available here
1975Q1 Trough 22 September 2003 Available here
1974Q3 Peak 22 September 2003 Available here

Therefore the euro area expanded until 1974. Since then there have been four complete cyclical episodes (recession followed by expansion) and it is too early to tell whether the recession that started after the third quarter of 2011 has ended.

Periods of recession are indicated in grey, and periods of expansion in white in the figure below.

Note: CEPR Recession shading for quarters follows the trough method used by FRED to compute NBER Recession Inndicators for the United States (see http://research.stlouisfed.org/fred2/series/USREC/downloaddata?cid=32262). It shows a recession from the period following the peak through the trough (i.e. the peak is not included in the recession shading, but the trough is).