There was mixed news for the eurozone as the region’s economic contraction slowed in the first three months of this year compared with the previous quarter. However at the same time we learned that retail sales fell more than expected in April.
The gross domestic product figures were confirmation of earlier estimates from the European Union’s statistics office.
They show that overall the economies of the 17 countries using the euro fell 0.2 percent quarter-on-quarter. Compared with the same period last year there was a 1.1 percent contraction.
A breakdown of the figures revealed imports declined more than exports, another signal of very weak domestic demand. There was a sharp fall in investment and the contribution from government spending was zero, for the third quarter running.
Tills not ringing
Retail sales – which are seen as an indicator of consumer demand – fell 0.5 percent in April from the previous month for a 1.1 percent year-on-year decline.
That points to continued weakness in household demand. It comes against a background of record high unemployment, It just hit 12.2 percent of the bloc’s workforce.
“Consumers are still doing little to help the eurozone return to growth, which is little surprise given the pressure they are under in a number of countries from high and rising unemployment and limited purchasing power,” said Howard Archer, economist at IHS Global Insight.
Growth or not in H2?
The European Commission has said it expects the eurozone to start growing again on a quarterly basis already from the second quarter, with a 0.1 percent quarterly expansion forecast.
And the European Central Bank also expects the eurozone to start growing later this year.
“The economic situation in the euro area remains challenging but there are a few signs of a possible stabilization, and our baseline scenario continues to be one of a very gradual recovery starting in the latter part of this year,” ECB President Mario Draghi said on Monday.
But economists were less upbeat.
“We don’t really think there will be a gradual recovery in the second half of the year. The ECB’s view is optimistic, this is mainly based by expectation of external developments in the world,” said Capital Economics’ Loynes.
“The reality is that a large chunk of the eurozone is stuck in recession because of the combination of impacts of the fiscal consolidation combined with structural deficits in competitiveness,” he added.