The euro area's economy has now registered two consecutive quarters of contraction
The Eurozone's economy contracted in the first quarter of 2023, the statistics agency Eurostat revealed on Thursday. This marks the second consecutive quarter of contraction, thus meeting the technical definition of a recession.
The announcement came following a downward revision of growth in the 20 countries that use the euro as their currency for the last quarter of 2022 and first quarter of this year.
Gross domestic product (GDP) in the Eurozone shrank by 0.1% between January and March, compared to the fourth quarter of 2022, Eurostat said in a statement.
The agency attributed the downturn to a slump in both government and household spending and to revised data from Germany, which showed that the Eurozone's largest economy slid into a recession at the beginning of the year.
Household consumption in the euro area dropped by 0.3% in the first quarter, highlighting the pressures that consumers are facing amid soaring prices, the report said.
"We expect growth to resume from 2Q23, but stay subdued through 2023, as headwinds from tighter financing conditions and faltering global demand keep a lid on activity," Bloomberg's Maeva Cousin and David Powell noted.
Sharp GDP declines were registered in Ireland (down 4.6%) and Lithuania (down 2.1%), while Germany posted a quarterly decline of 0.3%, Eurostat data showed.
The Netherlands, Malta, and Greece also reported a quarter-on-quarter contraction in the first three months of the year.
"News that GDP contracted in the first quarter after all means that the Eurozone has already fallen into a technical recession. We suspect that the economy will contract further over the rest of this year," Andrew Kenningham, chief Europe economist at Capital Economics, said.
The revised data comes despite reassurances from European Central Bank officials that a recession could be averted even as inflation surged to the highest levels since the euro was introduced.
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