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Eurozone Economy Contracts 0.1% from Q1 GDP of 2011

By Benjamin Spier
06 June 2012 09:36 GMT

THE TAKEAWAY: Eurozone Q1 GDP SA contracts 0.1% year over year -> Compared to the previous quarter, Q1 growth still seen as unchanged -> Euro rallies on risk appetite

The Eurozone experienced a small contraction in the first quarter of 2012 in comparison to Q1 of 2011, according to revised info released by the European Commission’s statistics office today. The seasonally adjusted GDP for Q1 contracted 0.1% when compared to last year, as opposed to initial NSA estimation of no change. The seasonally adjusted GDP was unchanged when compared to the previous quarter. The unmoved GDP was an improvement from the Q4 2011 -0.3% GDP contraction.

Eurozone exports increased by 1.0% during Q1, while imports only rose by 0.1%. Households final consumption expenditures were steady during the quarter. Europe’s biggest economy, Germany, saw a 0.5% increase during the first quarter, while France’s economy was stagnant and the Italian GDP was down -0.8%.

The lack in economic growth could be attributed to austerity measures. Later today, the European Central Bank will announce interest rates for June. Although 32 out of 44 economists surveyed by Bloomberg expect the bank to leave rates at 1.00%, there is a chance that rates could be cut .25%-.50% in an attempt to boost the lagging economy.

G7 leaders agreed to come to a coordinated response to the euro crisis during a conference call yesterday, and ECB President Mario Draghi could withhold stimulus until he sees more action taken by leading European governments. After the interest rate announcement, Draghi will hold a press conference and unveil ECB’s forecasts for growth in the area.

Eurozone_Economy_Contracts_0.1_from_Q1_GDP_of_2011____body_eurusd.png, Eurozone Economy Contracts 0.1% from Q1 GDP of 2011

EUR/USD corrected lower on the news of the slightly less than estimated Q1 GDP. However, a better than expected Australian GDP growth has improved risk appetite and sent EUR/USD higher in today’s trading. Resistance currently sits around 1.2530, by a trend line that started in January of 2011.

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06 June 2012 09:36 GMT