Euro Area Mired in Recession Pause

The CEPR Business Cycle Dating Committee has concluded the euro area might be mired in a recession pause. Several quarters of positive but extremely weak economic developments since early 2013 do not constitute sufficient evidence that the euro area recession that started after 2011Q3 is over.

The Centre’s Euro Area Business Cycle Dating Committee met in London on 11 June to examine recent data developments. It concluded:

• Since early 2013 the euro area has witnessed a prolonged episode of extremely weak growth: 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 precludes, however, calling an end to the recession that started after 2011Q3.
• 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 Committee’s decision not to call an end to the recession that started after 2011Q3 illustrates that its identification of peaks and troughs is not based on a mechanical rule but instead requires evidence of sustained growth. The Committee assesses both the duration and the strength of improvements in a range of economic indicators before it calls the end of a recession.

The CEPR Euro Area Business Cycle Dating Committee 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. According to the Committee, 2011Q3 marked a peak in economic activity and the onset of a euro-area recession. In its October 2013 findings, the Committee had concluded that neither the length nor the strength of the recovery was sufficient, as of 9 October 2013, to declare that the euro area had come out of the recession that started after 2011Q3.

The Committee released its Findings on 16 June.

Committee members
Philippe Weil, (Chair, 2012- ), 2003- , ULB and CEPR
Domenico Giannone, 2012- , ULB and CEPR
Refet Gürkaynak, 2012- , Bilkent University and CEPR
Monika Merz, 2012- , University of Vienna and CEPR
Richard Portes, 2003- , LBS and CEPR (ex officio)
Lucrezia Reichlin (Chair, 2003-2005), 2003- , LBS and CEPR
Albrecht Ritschl, 2012- , LSE and CEPR
Barbara Rossi, 2012- , ICREA-UPF, BGSE, CREI and CEPR
Karl Whelan, 2012- , UCD and CEPR
Rapporteur: Paul Hubert, 2012- , OFCE, Sciences Po

Former committee members:
Michael Artis, 2003-2009
Fabio Canova, 2003-2012
Jordi Gali, 2003-2012
Francesco Giavazzi, 2003-2012
Harald Uhlig (Chair, 2005-2012), 2003-2012
Volker Wieland, 2008-2012