Eurozone economic decline shallower than forecast

Eurozone gross domestic product nudged lower in the first quarter following a slump in consumer spending, official data showed on Tuesday.

The decline was nevertheless less than expected.

According to Eurostat, the European Union’s statistics office, seasonally-adjusted GDP decreased by 0.3% quarter-on-quarter in the first three months of the year. That was improvement on both consensus and the initial flash estimate for a 0.6% contraction.

It was also an improvement on the fourth quarter of 2020, when the economy shrank by 0.6%.

Year-on-year, the rate rose to -1.3% from the fourth quarter’s -4.9%, also above the consensus and flash estimate.

Across the wider bloc, the economy shrunk by 0.1% in the first quarter, compared to a 0.4% decline in the previous three months.

Household consumption plunged by 2.3% in the Eurozone, in large part because of the reintroduction of lockdown measures. That pulled GDP down by 1.2 percentage points, Eurostat said, but helping offset it were rising inventories, which contributed a 0.7 point increase, while gross fixed capital formation added 0.1 points.

Across individual countries, Ireland report the biggest growth, ahead 7.8% quarter-on-quarter, while Germany – the Eurozone’s largest economy – eased 1.8%. France declined 0.1% and Spain by 0.5% but Italy grew marginally, ahead 0.1%.

The biggest decline was in Portugal, off 3.3%.

Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics, said: “Looking ahead to the second and third quarters, the story should be reasonably simple and hopefully positive. A recovery is now underway, mainly via a rebound in consumer spending in services, and to a lesser extent on goods, the latter especially in Germany.

“More generally, our profile for Eurozone GDP growth through the rest of 2021 now implies that the economy will be expand by just over 4.5%.

Eurostat also published employment data on Tuesday. It said employment fell 0.3% quarter-on-quarter in the first three months of the year, or by 1.8% year-on-year.