EUROZONE IN RECESSION, BUT WHY?

Eurozone in technical recession after all.

The latest revisions of the GDP figure for the first quarter resulted in a 0.1% drop. That makes for a second decline in a row. These declines are so minimal that current economic circumstances are better described as broad stagnation!

It appears that a technical recession has indeed materialized, although the statistical offices took some time to officially declare it. The slight decline of 0.1% in both the fourth and first quarters is rather minimal, and the robust labour market makes it challenging to argue that we are currently experiencing a full-blown recessionary environment. Nevertheless, the economy's stagnation represents a clear departure from the recent post-pandemic boom.

The significant downward revision in economic figures can be primarily attributed to Germany revising down its numbers as new data became available. This fuels the notion that March witnessed remarkably feeble economic activity, thereby diminishing the likelihood of a rapid rebound in the second quarter. Furthermore, given the overall weakness reflected in May's survey data, it is probable that we can only anticipate a modest improvement following the two consecutive quarters of decline.

Overall, the Eurozone economy finds itself once again in a state of muddling through. The influence of monetary policy is becoming increasingly pronounced on economic activity, post-pandemic spending is waning, and the looming energy crisis further compounds the challenges ahead.

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