Economic activity in the euro area in the first three months of the year contracted by the most since records began in 1995 on plummeting investment and exports, a second estimate from Eurostat confirmed on Wednesday.
GDP for 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 3rd. The decline in GDP in the fourth quarter was 1.8%. The stretch of contraction that started in the second quarter of 2008 indicates a 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% drop in the final quarter of the previous year.
Among the components of GDP, household final consumption fell 0.5% sequentially in the first quarter after falling 0.4% in the fourth quarter. The drop in gross fixed capital formation was revised to 4.1% from 4.2%. Exports fell 8.8%, while imports dropped 7.6% after revisions.
Meanwhile, government spending rose by a revised 0.2% following an increase of 0.4%.
In June, the European Central Bank lowered its outlook for the 16-nation economy. The central bank said it expects Eurozone real GDP to contract between 5.1% and 4.1% in 2009, revised from 3.2%-2.2% contraction 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.
Meanwhile, 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 60 billion euros worth of covered bonds.
GDP for the EU27 fell 2.4% in the first quarter, unrevised from the initial estimate. However, the annual figure was downwardly revised to show a decline of 4.7% versus the 4.5% slump estimated earlier.
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