RTTNews - The euro area contracted the most since records began in 1995 on plummeting investment and exports during the first three months of the year, a second estimate from Eurostat confirmed on Wednesday.
The 16-nation bloc shrunk 2.5% in the first quarter from the fourth quarter. This marked the largest decline since 1995 and matched preliminary figures released on June 3. The decline in the fourth quarter was 1.8%. The stretch of contraction which started in the second quarter of 2008 indicates deep recession.
At the same time, the statistical agency revised the annual decline to show a contraction of 4.9% in the first quarter, slightly worse than a 4.8% fall initially estimated. That was bigger than a 1.7% fall in the final quarter of the previous year.
Among the components of gross domestic product or GDP, household final consumption fell 0.5% sequentially in the first quarter after falling 0.4% in the fourth quarter. Government expenditure rose by a revised 0.2% following an increase of 0.4%. The fall in gross fixed capital formation was revised to 4.1% from 4.2%. Exports fell 8.8%, while imports dropped 7.6% after revisions.
The recession in Eurozone was severe than in the U.S., where the GDP dropped 1.4% after falling 1.6% in the fourth quarter.
The European Central Bank in June lowered its outlook for the 16-nation economy. The central bank now expects Eurozone real GDP to contract between 5.1% and 4.1% in 2009, revised down from 3.2%-2.2% shrinkage predicted in March.
The Organization for Economic Co-operation and Development sees no clear visible signs of recovery in the euro area. The think tank expects Euro area GDP to contract 4.8% this year and to show no growth in 2010.
But, ECB President Jean-Claude Trichet sees a gradual recovery with positive quarterly growth rates by mid-2010.
In July, the ECB left its key interest rate unchanged at a record low of 1% for the second straight month to support the economy and initiated buying EUR 60 billion worth covered bonds.
GDP for the EU27 fell 2.4% in the first quarter, unrevised from the initial estimate. But, the annual figure was downwardly revised to show a decline of 4.7% versus the 4.5% slump estimated earlier.
For comments and feedback: contact email@example.com