Europe's economy shrinks in Q1

Photo: AP

Europe's economy shrank 0.6% in the first three months of the year as slow vaccine rollouts and extended lockdowns delayed a hoped-for recovery underlining how the region is lagging other major economies in rebounding from the coronavirus pandemic, news wires reported.

The fall in output for the 19 euro countries was smaller than the 1% contraction expected by economists but still far short of the rebound underway in the US and China. Figures announced on Thursday showed the US economy grew 1.6% during the first quarter, with business supported by strong consumer demand.

In Europe, it was the second straight quarter of falling output, meaning the region fell back into a recession despite a rebound in growth from July to September of last year. The latest data covers the quarter that ended 31 March, and there is optimism that things have improved since then.

France showed unexpected growth of 0.4% compared to the quarter before, while the main negative surprise came in Germany. Activity there shrank by a larger-than-expected 1.7% as the manufacturing sector was hit by disruption of parts supplies on top of the hit to services and travel from pandemic-related restrictions on activity.

Worry about a potential second straight lost vacation season has clouded the outlook for Mediterranean countries - Italy, Spain and Greece, which rely heavily on tourism. Greece has lifted quarantine restrictions on visitors from EU countries and will allow restaurants and cafes to reopen for outdoor service from 3 May. Travel receipts there sank 75% last year.

Economists said they expected an upturn in the coming weeks as vaccinations accelerate. The International Monetary Fund forecasts growth of 4.4% for the Eurozone for all of this year.

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