BRUSSELS – The euro zone economy contracted at a record rate and by more than expected in the first three months of the year and inflation slowed sharply as much economic activity in March came to a halt because of the Covid-19 pandemic, data showed on Thursday (April 30).
According to a preliminary flash estimate of the European Union’s statistics office Eurostat economic output in the 19 countries sharing the euro in January-March was 3.8 per cent smaller than in the previous three months – the sharpest quarterly decline since the time series started in 1995.
Economists polled by Reuters had expected a 3.5 per cent contraction after a 0.1 per cent quarterly growth in the last three months of 2019.
Year on year the gross domestic product contraction was 3.3 per cent in the first quarter.
Eurostat also said consumer prices in the euro zone grew 0.3 per cent month-on-month in April for a 0.4 per cent year-on-year increase, slowing from 0.7 per cent year-on-year in March.
But the slowdown of inflation was smaller than expected by economists, who on average forecast a deceleration to 0.1 per cent year-on-year in Aril, according to a Reuters poll.
The biggest drag on the overall index cam from energy prices, which dropped 9.6 per cent year-on-year.
Without the volatile energy and unprocessed food components – what the European Central Bank calls core inflation – prices grew 0.7 per cent on the month for a 1.1 per cent year-on-year increase. In March this measures was an increase of 1.2 per cent per cent.
An even narrower measure of inflation that excludes also alcohol and tobacco prices and is followed by many market economists showed prices going up 0.8 per cent on the month in April and 0.9 per cent year-on-year, against a 1.0 per cent annual increase in March.
Separately, Eurostat said euro zone unemployment, a lagging indicator which reflect changes in the economy with a delay, ticked up to 7.4 per cent of the workforce in March from 7.3 per cent in February.