A steep drop in exports and corporate investment led to a record economic contraction in the euro zone in the first quarter of 2009, the European Union's statistics office said this morning.
Eurostat confirmed its earlier estimate that gross domestic product in the 16 countries using the euro fell 2.5 per cent on the quarter, and revised the year-on-year contraction to 4.9 per cent from 4.8 per cent.
It said the currency area's exports plunged 8.8 per cent quarter-on-quarter as the global financial crisis triggered the worst recession since World War Two in many parts of the world.
In the United States during the first quarter, GDP contracted by 1.4 per cent on the quarter and in Japan it sank by 3.8 per cent.
Eurostat said euro zone corporate investment fell by 4.1 per cent quarter-on-quarter. Household consumption fared better, declining 0.5 per cent. Government consumption grew by 0.2 per cent as billions of euros were spent to boost the economy.
Analysts and the European Commission expect smaller GDP falls in the remaining quarters of 2009 and a modest recovery in 2010.
But growing unemployment, which hit a 10-year high of 9.5 per cent in May, is set to limit people's spending power and undermine any turnaround.
Euro zone finance ministers said this week that the euro zone's potential growth, or the highest expansion sustainable over time, could fall below 1 per cent this and next year from 2.2 per cent recorded before recession struck.
With inflation in negative territory, the European Central Bank is expected to leave its main interest rate at a record low of 1 per cent well into next year.
Eurostat said that in the wider 27-nation European Union, GDP contracted by 2.4 per cent on the quarter and 4.7 per cent annually, with only Poland and Cyprus having escaped recession.
In Germany, the euro zone's biggest economy, GDP shrank by 3.8 per cent quarter-on-quarter and 6.9 per cent year-on-year.
Reuters