Eurozone Q1 Growth Falls At Record Pace, Inflation Falters In April
The fall in growth was the worst since the introduction of the single currency in 1999.

- EZ GDP shrinks by 3.8pct

- Year-on-year inflation slows to 0.4pct

 

By Eric Culp

European Editor, LiveSquawk News

@EricCulpLS

 

The Eurozone economy contracted at a record rate in the first quarter, and consumer price growth declined in April as much of the world continues to grapple with the economic effects of the Covid-19 pandemic.

 

Preliminary estimates from the EU said economic activity in the single-currency area shrank by 3.8pct in the three months to March, the worst contraction since the introduction of the euro in 1999. The decline was in-line with market expectations and followed a meagre 0.1 increase in the final quarter of 2019.

 

The annual GDP growth rate in the first quarter dropped to -3.3pct--the worst showing since 2009--to beat the market estimate of -3.4pct. The Eurozone economy grew by 1pct year-on-year in the previous quarter.

 

The US reported a 4.8pct quarterly GDP contraction on Wednesday, the sharpest fall since late 2008.

 

 

Welcome to the corona quarter

 

The sharp decline in Eurozone growth in the first quarter suggests even tougher times ahead, according to analysts.

 

“This was only with roughly two weeks of lockdown and supply chain disruptions,” tweeted ING Chief German Economist Carsten Brzeski. “Brace yourself for worse to happen.”

 

Virtually all of Europe has been locked down in April, with some countries relaxing a scant few restrictions over the past two weeks.

 

Capital Economics Chief Europe Economist Andrew Kenningham said, “The blizzard of depressing economic data released this morning confirms that the Eurozone economy was in freefall at the end of March, with GDP dropping by a record amount throughout the region.”

 

Quarterly contractions in major Eurozone economies were largely worse than expected, according to data released Thursday. Growth fell 5.8pct in France and 5.2pct in Spain. However, the 4.8pct decline in Italy beat the market forecast.

 

Official first-quarter data from Germany, the largest economy in the single-currency area, is due on 15 May.

 

Inflation better than expected

 

Consumer price growth in the euro-area this month dropped to an annual rate of 0.4pct from 0.7pct in March but beat the market estimate of 0.1pct.

 

Core inflation eased to 0.9pct from 1.0pct last month.

 

But analysts questioned the reliability of the consumer price data due to collection problems related to the lockdowns, suggesting it could take months before the numbers are as accurate as before the crisis.

 

Declining energy prices dragged the Eurozone headline inflation lower. “This was offset by a jump in prices of food (unprocessed food prices increased 7.7pct year-on-year), perhaps reflecting a mix of stockpiling at the beginning of the month and difficulties in harvesting agricultural produce,” Kenningham said.