Eurozone tips into recession

The Eurozone has tipped into recession, official data showed on Thursday, after a series of downward revisions.

According to Eurostat, the statistical office of the European Union, GDP fell by 0.1% in the first quarter when compared the previous three months, revised down from an earlier estimate for growth of 0.1%.

It follows a 0.1% contraction in the fourth quarter of 2022, meaning the Eurozone economy has now shrunk for two successive quarters, the technical definition of recession. It was originally estimated that fourth-quarter GDP was flat.

Year-on-year, first-quarter GDP rose by 1%.

Across the wider EU, GDP rose by 0.1% in first quarter and by 1% year-on-year.

Among individual members, Germany – the bloc’s largest economy – saw GDP fall 0.3% in the first quarter, adding to a 0.5% decline at the end of 2022. Ireland also saw a sharp fall, with GDP contracting 4.6%.

Italy, however, saw GDP nudge 0.6% higher in the first quarter, while in Spain it rose by 0.5% and by 0.2% in France.

Employment, meanwhile, increased by 0.6% in the Eurozone in the first quarter, according to Eurostat, and by 0.5% across the wider bloc, when compared to the previous three months.

Bert Colijn, senior economist, Eurozone, at ING, said: “The decline [in GDP] in both the fourth and first quarters is so minimal, and the labour market is so strong, that’s it’s hard to argue that this is a recessionary environment. The stagnation of the economy does mark a clear cut form the recent post-pandemic boom though.

“The significant downward revision was mainly due to Germany revising down its number as new data came in.

“Overall, the Eurozone economy is very much back to muddling through, as monetary policy starts to weigh more heavily on activity, post-pandemic spending fades and the energy crisis looms.”

Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics, said: “The details show that declining consumer and government spending were main hits to growth in the first quarter.

“Overall, the data now point to significant contraction in domestic demand in the past six months. It will be interest to see whether the European Central Bank, which has been adamant that a recession is not its baseline, will changes its view based on this new information.”