Eurozone recession continues
WASHINGTON — Europe’s recession stretched into the first three months of the year, making it the single-currency region’s longest downturn and raising concerns about its effect on the U.S. recovery.
The 17-nation Eurozone economy contracted 0.2% in the first quarter compared with the previous quarter, according to data released Wednesday by Eurostat, the region’s statistical office. It was the sixth straight quarter of contraction, exceeding the five-quarter recession from 2008-09.
The first-quarter performance was an improvement over the final three months last year, when the Eurozone economy shrank 0.6% compared with the previous quarter, but the latest figure came in below economists’ expectations of a 0.1% contraction.
The European recession has reduced demand there for foreign goods, which is not good for the U.S. economy.
“Europe is a major trading partner ... and we are going to start feeling that slowdown,” said Alan Whitman, managing director of Morgan Stanley Wealth Management in Pasadena.
Exports to the European Union fell to a two-year low in February before rebounding in March, according to the Commerce Department.
The U.S. economy has been growing since the end of the Great Recession in mid-2009, and expanded at a 2.5% annual rate in the first quarter.
But the Eurozone has struggled as several southern European nations have enacted austerity measures in the face of soaring interest rates on their sovereign debt.
“In countries such as Spain, Italy, Portugal, Cyprus and Greece, they’re all facing extreme fiscal tightening to get their public finances in shape,” said Howard Archer, chief European and United Kingdom economist at IHS Global Insight. “This is really crippling domestic demand and causing unemployment to rise sharply.”
The region’s unemployment rate is at an all-time high of 12.1%, which has pushed the European Central Bank to take more aggressive measures to try to stimulate growth.
Germany, the region’s largest economy, nudged back into positive economic growth in the first quarter. It expanded 0.1% in the first quarter after contracting 0.7% in the previous quarter.
But the Eurozone’s other major economic players remained stuck in recession.
The French economy shrank 0.2% in the first quarter, the same as in the fourth quarter of last year. Italy’s economy contracted 0.5% in the first quarter, an improvement over the 0.9% decline at the end of last year.
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