Euro zone economy contracts less than expected in Q1

The euro zone economy contracted by much less than expected in the first quarter of the year, revised data from the EU’s statistics office showed, with a buildup of inventories and investment offset by reduced consumer spending.

Eurostat said gross domestic product in the 19 countries sharing the euro contracted 0.3 per cent quarter-on-quarter for a 1.3 per cent year-on-year decline. These compared with estimates three weeks ago of respectively -0.6 per cent and -1.8 per cent.

Italy grew marginally, against a previous estimate of a dip, and France dipped, against an earlier estimate of growth. Germany was very slightly weaker, while a number of smaller countries were more positive.Ireland (+7.8 per cent) and Croatia (+5.8 per cent) recorded the sharpest increases of GDP compared to the previous quarter.

Eurostat said rising inventories added 0.7 percentage points to the overall quarterly figure in the January-March period and investment and trade each added another 0.1 points.

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Falling household consumption, hit by pandemic lockdowns including of shops across Europe, subtracted 1.2 points and government spending was neutral.

The 0.3 per cent GDP contraction comes after a 0.6 per cent GDP quarterly fall in the previous three months, meaning the euro zone economy was in its second technical recession since the start of the Covid-19 pandemic.

Eurostat said also employment fell 0.3 per cent quarter-on-quarter in January-March and was down 1.8 per cent year-on-year. – Reuters