Europe’s economy contracted at the fastest pace in at least 13 years in the first quarter as companies cut output and jobs to survive the worst global slump in more than six decades.

Gross domestic product in the 16-member euro region dropped 2.5 percent from the fourth quarter, when it fell 1.6 percent, the European Union’s statistics office in Luxembourg said today. That’s the biggest drop since the euro-area GDP data were first compiled in 1995 and exceeded the 2 percent decline economists expected in a Bloomberg News survey. Inflation held at 0.6 percent in April, a separate report showed.

The deepest global recession since World War II is curbing European exports and eroding consumer demand, forcing companies to cut spending and jobs. The German and Italian economies also contracted by the most on record in the first quarter. Hong Kong’s economy shrank at the fastest pace since at least 1990, prompting the government to forecast a full-year contraction of as much as 6.5 percent.

“The first quarter will hopefully remain the weakest overall,” said Christoph Weil, an economist at Commerzbank AG in Frankfurt. “The economy may continue to shrink through the third before we see some kind of stabilization.”

From a year earlier, the euro-area economy shrank 4.6 percent, also the biggest drop on record, today’s report showed. The statistics office is scheduled to publish a breakdown of first-quarter GDP on June 3. The European Commission on May 4 cut its outlook to project a contraction of 4 percent this year and 0.1 percent in 2010.

Source/Full Story: Bloomberg.com

Related Items