Euro zone GDP contraction slows in first quarter, April retail sales worse than forecast

Wed Jun 5, 2013 6:34am EDT
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By Jan Strupczewski

BRUSSELS (Reuters) - The pace of the euro zone's economic contraction slowed quarter-on-quarter in the first three months of this year, EU statistics showed on Wednesday, but retail sales in April pointed to continued weakness in household demand.

The European Union's statistics office confirmed its earlier estimates that gross domestic product in the 17 countries using the euro fell 0.2 percent quarter-on-quarter in the January-March period, for a 1.1 percent year-on-year contraction.

That came after a 0.6 percent decline in euro zone quarterly output in the previous three months.

"The euro zone remains stuck in recession, despite some signs that the recession is easing a bit," said Jonathan Loynes, chief European economist at Capital Economics.

The smaller fall in the first quarter of 2013 was mainly thanks to a stabilization of inventories and household demand, which, unlike in the previous three months, did not weigh down the overall result.

But retail sales data, a proxy for consumer demand, fell more than expected in April, pointing to continued weakness of private consumption at the start of the second quarter.

Economists said that was to be expected given record high unemployment of 12.2 percent.

"Consumers are still doing little to help the euro zone return to growth, which is little surprise given the pressure they are under in a number of countries from high and rising unemployment and limited purchasing power," said Howard Archer, economist at IHS Global Insight.   Continued...

A customer walks by fish cans at the Loja Portugueza in downtown Lisbon May 7, 2013. EUTERS/Jose Manuel Ribeiro