Monday, the European Commission sharply lowered the GDP outlook for the euro area in its Spring Forecast. Meanwhile, the commission expects the EU economy to broadly stabilize on support measures in 2010 after experiencing the deepest recession in the post-war era this year. Elsewhere, German retail sales unexpectedly dropped in March as fears of rising unemployment weighed on households' spending intentions.

Eurozone

The Brussels-based European Commission expects the 16-nation euro area to contract 4% in 2009 and 0.1% next year. In its interim forecast in January, the commission said the euro area will contract 1.9% in 2009 and will grow 0.4% in 2010.

For the larger EU, the commission projected a 4% contraction this year, making it the worst recession since World War II. However, the economy is expected to regain momentum in the course of 2010 due to the impact of fiscal and monetary stimulus measures. Interim forecasts for the EU had shown a 1.8% contraction in 2009 and 0.5% growth in the coming year.

The pace of slowdown in Eurozone manufacturing activity eased in April, reports said citing survey data from the Markit Economics. The purchasing managers' index, or PMI, rose to a six-month high of 36.8 in April from 33.9 in March. It was also an increase from the initial estimate of 36.7. Economists had forecast the PMI to remain at its flash reading. A PMI reading below 50 suggests contraction in the sector.

The latest Sentix survey showed that the economic indicator for the Eurozone improved by a point to minus 34.3 in May. Economists expected the reading to come in at minus 28. The latest reading is the highest since October 2008.

Data released by Germany's Federal Statistical Office showed that calendar and seasonally adjusted retail sales in real terms fell 1% month-on-month in March after stagnation in February. Meanwhile, economists had forecast a 0.2% increase.

The German economy is not expected to grow before the second half of 2010, European Central Bank Governing Council member Axel Weber reiterated. He noted that the recessionary trend in the coming months would not be as pronounced as it was in the past few months.

French new car registrations declined 7% year-on-year to 184,706 in April, data released by car manufacturers' association CCFA showed. After adjusting for working days, the decline was just 2.5%.

Italian producer prices dropped 0.6% month-on-month in March, larger than an expected 0.4% decline, a statistical office report revealed.

Malta's National Statistics Office said that the industrial producer price index rose 5.4% year-over-year in February, larger than the 1.7% increase in the previous month.

Rest of Europe

The Swiss SVME PMI rose to 34.7 points in April from 32.6 points logged in the previous month, a report from Credit Suisse showed. The index stood above the expected reading of 34.

Sweden's seasonally adjusted PMI rose to 38.8 in April from 36.7 in March, the latest survey by the Swedbank and Silf showed. Economists expected the reading to come in at 38.4.

The total overnight stays by tourists in hotels in Iceland rose 2% year-on-year to 84,700 in March, Statistics Iceland said.

Macedonia's State Statistical Office announced that the consumer price index or CPI dropped 0.5% year-over-year in April, in contrast to a 0.2% increase in March. Meanwhile, the retail price index declined 1% annually in April, worse than a 0.7% fall in the previous month.

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