Sharp contraction in business activity in euro zone

With a 2.5% drop in GDP in the first quarter compared with the previous quarter, the euro zone sank further into recession. It was the sharpest fall in GDP recorded for a quarter since statistics were first compiled for the euro zone, in 1995.
The EU economy as a whole also showed a record contraction of 2.5%. Everybody has been hit by the longest recession since the post-war years: -3.8% in the first quarter in Germany, -2.4% in Italy, -1.9% in the United Kingdom, -1.8% in Spain, -1.2% in France, -1.5% in Portugal, -2.8% in the Netherlands, -2.6% in Romania, -2.8% in Austria, etc. The crisis is worsening. The Commission predicts that unemployment will come close to 11% in the EU next year, affecting 26.3 million people compared with 16.7 million in 2007.  Industrial output fell by over 20% in March over a year according to statistics published by Eurostat, clocking up a new record and confirming the sharp economic contraction in the first quarter. Once again, the Commission has had to revise its growth forecasts downwards. Recovery is now not expected before the second half of 2010. The EU estimates that GDP will fall by 4% in 2009 and 0.1% in 2010. Europe is likely to be harder hit by the crisis than the United States.
Germany
Germany hopes that the worst is behind it after publishing reassuring figures for industrial output and exports. According to figures issued by the Federal Statistical Office (Destatis), the annual rate of decline in exports slowed to -15.8% for one year in March, compared to -23.5% in February. Over one month, from February to March, exports rose for the first time in six months to +0.7. Industrial output fell by 12% in Germany in the first quarter compared with the fourth quarter of 2008, but after several months of decline, it levelled off at +0% in March compared with -3.4% in February. The German government predicts that GDP will fall by 6% in 2009 and unemployment figures are likely to rise to 4.6 million. However, it hopes that the peak of the crisis is now behind them.
France
French industrial output fell again by 1.4% in March, after dropping by 0.9% in February, reaching a total of -6.9% for the first quarter overall, compared with the first three months of 2008. According to INSEE, it fell by 15.5% over a year. Gross domestic product fell by 1.2% in the first quarter, after -1.5% in the previous quarter. The government is now predicting a drop of 3% for the year 2009.
Spain
GDP fell by 1.8% in the first quarter, i.e. 8 points below the previous quarter, its sharpest decline for two generations. The annual change is even more striking, as GDP fell by 2.9% compared with the same period last year. Spain is also suffering from a record unemployment rate for Europe, of 17%.