THE TAKEAWAY: Portuguese GDP for Q1 comes in at -0.1%, better than expected -> Shrinking economy attributed to austerity measures -> EUR/USD corrects from earlier session rally
Portugal’s gross domestic product fell for the sixth quarter in a row for Q1 2012, but the 0.1% drop was better than the -1.0% shrink expected by analysts. The GDP dropped -2.2% compared to the first quarter of 2011, which was also better than analysts’ expectations.
The economic slowdown was due to the lower government spending and tax hikes implemented to cut debt in Portugal. The austerity measures were stipulated by the 78 billion euro bailout plan provided by the EU and IMF.
The Portugese GDP was released at the same time as the Eurozone GDP came in slightly better than expected with 0.0% growth for the first quarter. EUR/USD fell slightly following both releases, possibly correcting from a small earlier day rally.