Recession in the 17-nation currency bloc extended into first quarter as initially estimated, with notable downturn in investment and exports, while household spending alone improved albeit modestly.
Gross domestic product logged a 0.2 percent sequential contraction in the first three months of 2013, as initially estimated, posting six consecutive quarters of decline, latest figures from Eurostat showed Wednesday. The sequential decline follows a 0.6 percent drop in the fourth quarter of 2012.
On a yearly basis, GDP was down 1.1 percent, which was slightly sharper than the 1 percent contraction estimated on May 15. In the fourth quarter, it slipped 1 percent.
The expenditure side breakdown showed that all sub-components except household spending declined in the first quarter from a quarter ago.
The decline in investment accelerated to 1.6 percent from 1.4 percent. At the same time, exports and imports were down 0.8 percent and 1.1 percent, respectively.
The contribution of change in inventories to GDP was neutral. Government spending slipped 0.1 percent after staying flat in the previous quarter.
Meanwhile, household expenditure grew 0.1 percent, recovering from last quarter's 0.6 percent decline despite high unemployment and subdued purchasing power.
Separate data released today revealed that retail sales declined for the third consecutive month at the start of second quarter, reflecting fragile spending among consumers.
Due to a sharp decline in food sales, retail turnover dropped by a more-than-expected 0.5 percent month-on-month in April. Economists had forecast a 0.2 percent fall, similar to the revised decrease seen in March.
On an annual basis, total retail sales slipped 1.1 percent compared with a 2.2 percent drop in March. The decline was steeper-than a 0.8 percent fall predicted by economists.
IHS Global Insight's Chief European economist Howard Archer said gradually improving consumer confidence and the boost to purchasing power coming from low inflation across the Eurozone will provide some support to consumer spending over the months ahead and help economic activity to finally stop contracting sooner rather than later.
The outcome of Purchasing Managers' survey was encouraging with the downturn easing to the slowest in three months in May. Rates of decline eased for both manufacturing and service sector business activity, reaching 15- and three-month lows respectively.
European Central Bank Chief Mario Draghi said earlier in the week that there are a few signs of a possible stabilization in the euro area, but the economic situation remains challenging.
Citing lingering effects of the debt crisis, the ongoing drag from fiscal consolidation and weaknesses in credit markets, Paris-based Organization for Economic Co-operation and Development last week downgraded Eurozone GDP outlook. The group forecast the 17-nation bloc to contract 0.6 percent in 2013.
With the Eurozone likely to continue to struggle for growth over the coming months, IHS Global Insight expects the European Central Bank to eventually take interest rates down to 0.25 percent from from 0.50 percent. But such a move is unlikely at its June meeting on Thursday.
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