Euro Area: Third estimate confirms GDP contracted again in Q1 amid tighter lockdowns

Euro Area GDP Q1 2021

Euro Area: Third estimate confirms GDP contracted again in Q1 amid tighter lockdowns

According to a third estimate, the Euro area economy contracted a seasonally-adjusted 0.3% from the previous quarter in Q1, which followed Q4 2020’s 0.6% drop and improved on the 0.6% decline reported in preliminary releases. Compared with the same quarter of the previous year, seasonally-adjusted GDP fell 1.3% in Q1, marking a softer decline than Q4 2020’s 4.7% drop and coming in above the preliminary estimate of a 1.8% contraction.

The quarterly downturn came as Covid-19-related containment measures were tightened throughout the single-currency union, restraining business activity and household spending. Private consumption fell 2.3% over the previous quarter in Q1 (Q4 2020: -2.9% s.a. qoq) amid still-downbeat consumer sentiment. Moreover, growth in fixed investment cooled to 0.2% (Q4 2020: +2.5% s.a. qoq), while public consumption flatlined (Q1 2021: 0.0% s.a. qoq; Q4 2020: +0.4% s.a. qoq). Meanwhile, restocking added 0.7 percentage points to growth, as companies likely opted to replenish their warehouses amid vaccine-related hopes of higher demand, and emerging supply disruptions.

Meanwhile, the external sector added 0.1 percentage points to growth in Q1 as exports increased 1.0% (Q4 2020: +3.8% s.a. qoq), while import growth softened to a greater extent (Q1 2021: +0.9% s.a. qoq; Q4 2020: +4.5% s.a. qoq).

In terms of specific countries, the sharpest fall among major players was recorded in Germany (Q1 2021: -1.8% s.a. qoq), followed by Spain (Q1 2021: -0.5% s.a. qoq) and France (Q1 2021: -0.1% s.a. qoq). Meanwhile, the Italian economy expanded 0.1% in seasonally-adjusted quarter-on-quarter terms.

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