Euro Area: Eurozone enters technical recession

Euro Area GDP Q1 2023

Euro Area: Eurozone enters technical recession

The economy dipped 0.1% from the previous quarter in seasonally adjusted quarter-on-quarter terms in Q1, matching Q4’s 0.1% drop and coming in below the preliminary reading of a 0.1% increase. Compared with Q1 2022, seasonally adjusted annual GDP increased 1.0% in Q1, following the 1.8% rise recorded in the previous quarter. The quarterly deceleration came on the back of elevated inflation, weak industrial activity and a worsening global economic outlook.

On the domestic front, household spending contracted 0.3% in Q1, following the 1.0% decline recorded in Q4, as households suffered from the effects of high inflation and depleted savings. Meanwhile, fixed investment expanded 0.6% in Q1, swinging from Q4’s 3.5% decrease, likely sustained by the disbursement of Next Generation EU funds. Lastly, public spending fell 1.6% (Q4: +0.8%), while destocking subtracted 0.4 percentage points from growth.

On the external front, exports of goods and services dipped 0.1% in the first quarter, which was above the fourth quarter’s 0.3% decrease. Meanwhile, imports of goods and services dropped 1.3% in Q1 (Q4: -2.5%). Overall, the external sector contributed 0.7 percentage points to the quarter-on-quarter reading.

Commenting on the release, Bert Colijn, senior economist at ING, stated:

“The significant downward revision was mainly due to Germany revising down its numbers as new data came in. […] Overall, the eurozone economy is very much back to muddling through, as monetary policy starts to weigh more heavily on activity, post-pandemic spending fades and the energy crisis looms.”

Free sample report

Access essential information in the shortest time possible. FocusEconomics provide hundreds of consensus forecast reports from the most reputable economic research authorities in the world.
Close Left Media Arrows Left Media Circles Right Media Arrows Right Media Circles Arrow Quote Wave Address Email Telephone Man in front of screen with line chart Document with bar chart and magnifying glass Application window with bar chart Target with arrow Line Chart Stopwatch Globe with arrows Document with bar chart in front of screen Bar chart with magnifying glass and dollar sign Lightbulb Document with bookmark Laptop with download icon Calendar Icon Nav Menu Arrow Arrow Right Long Icon Arrow Right Icon Chevron Right Icon Chevron Left Icon Briefcase Icon Linkedin In Icon Full Linkedin Icon Filter Facebook Linkedin Twitter Pinterest