Eurozone shrinks on slow investment and exports

THE Eurozone economy shrank by a record amount in the first quarter of 2009 on a quarterly basis because of a slump in exports and investment, the European Union’s statistics office Eurostat said yesterday.

Eurostat confirmed that output in the 16-country bloc shrank by 2.5 per cent in the first three months of 2009 and revised slightly downwards its estimate of year-on-year contraction to 4.9 per cent.

Deep contraction was evident across the region, with Germany suffering a particularly sharp decline of 3.8 per cent quarter-on-quarter.

Eurozone exports slumped by 8.8 per cent in the first quarter, although imports were also lower by 7.6 per cent. Investments fell by 4.1 per cent.

Howard Archer at IHS Global Insight noted that the breakdown of the GDP data makes very unappetising reading but said that first quarter GDP data is old news and the rate of contraction within the Eurozone moderated in the second quarter.

German industrial production provided some relief, increasing by 3.7 per cent in May – the strongest increase since August 1993 – driven higher by an 8.3 per cent increase in production of capital goods.