The European economy shrank again in the first three months of the year, entering an expected technical recession after having shrank in the last quarter of 2020. Gross domestic product fell 0.6% in the eurozone compared with the previous period, and by 0.4% in the wider European Union.
- France was the only major economy to grow in the quarter, up 0.4%, the result of President Emmanuel Macron’s reluctance to impose restrictions early this year as the COVID-19 pandemic’s third wave hit. The country’s delayed lockdown will now weigh on the pace of the recovery in the second quarter.
- The German economy contracted by 1.7% in the quarter, a worse performance than analysts expected. The coronavirus crisis “affected household consumption in particular, while exports of goods supported the economy,” said the federal bureau of statistics on Friday.
- Italy’s GDP fell 0.4% as Spain’s shrank by 0.5%, in line with analysts’ expectations.
- Inflation in the eurozone was running at an annual pace of 1.6% in April, according to statistical office Eurostat’s preliminary estimate, up from the 1.3% rate recorded in March. The boost was due to a hefty increase of energy prices, up more than 10% on an annual basis.
The outlook: Europe finally seems to be overcoming the problems that led to the failure of its COVID-19 vaccination campaigns earlier this year. With the phaseout of lockdowns and restrictions, the recovery should firm up in the coming months. The International Monetary Fund sees the eurozone growing 4.5% this year — still lagging far behind the U.S. and China.