As we flagged, the eurozone has officially entered a technical recession at the beginning of this year, as its gross domestic product (GDP) contracted for two consecutive quarters, according to Eurostat. Revised data released by Eurostat on Thursday revealed that the eurozone’s GDP declined by 0.1% between January and March, following a similar magnitude of decline from October to December.
Earlier projections from Eurostat had anticipated a 0.1% growth in the last quarter of 2022 compared to the previous quarter, as well as a 0.2% growth in the first quarter of 2023. The consensus expected only a small adjustment to 0.0%. The significant downward revision can be mainly attributed to Germany and Ireland.
Looking at components, the first-quarter weakness in the eurozone’s economy can be attributed to a decline in government and household spending, as indicated by Eurostat. Inventories had a negative impact, while trade supported output. Germany, Greece, Ireland, Estonia, Lithuania, Malta, and the Netherlands were among the countries that experienced a winter recession.
This latest data marks the first time the eurozone has experienced a recession since the COVID-19 pandemic. According to Bloomberg, it comes as a blow to policymakers and European Central Bank officials who had repeatedly expressed optimism that a downturn could be averted, despite the soaring inflation levels observed since the introduction of the euro.