Eurozone GDP Fell 4.8 Percent

The European economy is not doing as badly as the United States, according to figures from Eurostat. Eurozone gross domestic product fell 4.8 percent in the first quarter, revised downward from an earlier report of 4.6 percent, as compared with a year earlier.

U.S. GDP decreased at an annual rate of 5.7 percent in the first quarter, according to preliminary estimates released May 29 by the U.S. Bureau of Economic Analysis.

Eurozone GDP dropped 2.5% quarter-on-quarter as deep contraction was evident across the region. Germany suffered particularly sharp contraction of 3.8% quarter-on-quarter as the collapse in world trade slashed exports.

Across Europe, investment fell very sharply and exports plummeted. Imports were down sharply, too, partially offsetting the impact of trade on GDP. Inventories and consumer spending contracted substantially.

The latest data and survey evidence from the second quarter indicate the rate of contraction is moderating as monetary and fiscal stimulus kicks in, according to IHS Global Insight. Inventory adjustments are becoming less pronounced, and there are signs that the fall in export orders is slowing appreciably, said IHS Global’s chief UK and European economist Howard Archer.

“Nevertheless, the Eurozone outlook still looks far from bright and we suspect that sustainable recovery is unlikely to develop until 2010,” said Archer. “Sharply rising Eurozone unemployment is a particular threat to recovery hopes, while global economic activity and trade is still depressed despite some signs of recent improvement, credit conditions remain tight, financial sector problems persist and business and consumer confidence is still very low by long-term norms.”

IHS projects a 4 percent or greater contraction in Eurozone GDP in 2009 followed by gradual recovery developing in 2010.

Contact Thomas L. Gallagher at tgallagher@joc.com.