RTTN:Eurozone Recession Extends Into Sixth Quarter
The euro area economy remained in recession in the first three months of 2013 with the gross domestic product contracting for a sixth consecutive quarter, preliminary estimates from Eurostat revealed Wednesday.
Most of the economies in the single-currency bloc are struggling to recover from the downturn amid stringent austerity. While Germany's economic performance was weaker than forecast by economists, France slipped into recession in the first quarter.
Eurozone's gross domestic product fell 0.2 percent quarter-on-quarter in the first quarter, faster than the expected 0.1 percent contraction. However, the outcome was better than a 0.6 percent decline reported in the fourth quarter of 2012.
"Despite the improvement at the start of the year, we doubt that the region is about to embark on a sustained recovery any time soon," said Ben May, European Economist at Capital Economics.
"After all, the major euro-zone business surveys have recently weakened, austerity will hamper growth in large parts of the region and the recent deterioration in the outlook for some of the region's export markets does not bode well either," May said.
The latest stretch of economic contraction has exceeded the 2008-2009 recession and is the longest since the birth of the bloc in the 1990s.
The economy shrank 1 percent on an annual basis. This was steeper than a 0.9 percent contraction recorded in the fourth quarter last year. Economists had also forecast a 0.9 percent year-on-year decline in GDP.
Data today showed that the German economy narrowly escaped recession in the first quarter of 2013 with the GDP expanding 0.1 percent quarter-on-quarter following a 0.7 percent contraction in the fourth quarter. French GDP fell 0.2 percent sequentially after a similar contraction in the previous quarter.
Meanwhile, Spain and Italy remained mired in recession, though the pace of contraction has slowed since the fourth quarter. Recession deepened in Cyprus, the latest victim of the Eurozone debt crisis. Downturn in Portugal and Greece continued, though GDP contracted at a slower pace than in the fourth quarter.
The European Union has indicated that it wants to turn away from austerity in order to boost growth and jobs creation. The deepening recession is also making it difficult for the countries to attain deficit reduction targets.
Releasing its latest Spring Forecast earlier this month, the European Commission said the euro area economy will contract 0.4 percent in 2013, as the region heads into its second year of recession. The GDP is expected to rise 1.2 percent in 2014. Both projections were weaker than its February forecasts.
The European Central Bank this month reduced the main refinancing rate by 25 basis points to a record low 0.50 percent. ECB Chief Mario Draghi has said that the monetary policy will remain accommodative "as long as needed."
