Finally the ECB manages to send the Euro area into a recession
The repeated attempts by the ECB and the Commission were ultimately successful: the euro area economy entered a recession. The Eurozone economy unexpectedly contracted by 0.1% on a quarterly basis in the first three months of 2023, compared with early estimates of a modest 0.1% increase.
Data for the final quarter of 2022 has also been revised to show a decline of 0.1%, instead of a flat reading, meaning the Eurozone has entered a minor technical recession.
In the 1st quarter of 2023, household spending decreased by 0.3% (compared to -1% in the 4th quarter of 2022) due to high inflation and financing costs related to the interest applied by the ECB to the banking system.
In addition, public spending decreased by 1.6% (vs. +0.8%) as governments reduced stimuli that should have partly offset the impact of rising energy costs and due to cope with the increased interest rates applied by the ECB to the public debt, as well as the constant warnings of the Commission.
. On the other hand, gross fixed investments recorded a recovery (+0.6% against -3.5%). Furthermore, exports decreased by 0.1% (against -0.2%) and imports decreased by 1.3% (against -2.5%).
Among the largest economies of the bloc, GDP contracted in Germany (-0.3%) and the Netherlands (-0.7%), while there was an expansion in France (0.2%), Italy (0.6%) and Spain (0.5%). Here is the related graph
For now, experts are talking about a "Short Technical Recession", exactly as they were talking about temporary inflation 24 months ago. In reality, my impression is that the continuous, repeated attempts to ballast the European economy with high interest rates, in the face of imported inflation, and to burden industry and agriculture with improper environmental costs are having an effect the economy begins to contract. Even the sturdiest of camels eventually sees his back break from loading him with weights.
We'll see if the recession is just an episode or if it will continue over time. I wouldn't bet on its brevity: the political decisions behind this situation will have consequences for a long time and will cease to be effective only when they are cancelled. It will take months for this to happen.
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The article The ECB finally succeeds in sending the Euro area into recession comes from Scenari Economici .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/finalmente-la-bce-riesce-a-mandare-larea-euro-in-recessione/ on Thu, 08 Jun 2023 15:06:05 +0000.