Eurozone officially in recession

The euro zone entered a technical recession in the first three months of 2023, putting households under increasing pressure from the rising cost of living in the 20 countries that use the euro as their currency, according to revised data and published this Thursday 8 June by Eurostat.

Figures from the EU's statistics office showed on Thursday gross domestic product (GDP) fell 0.1% in the first quarter, following revisions to previous estimates.Eurozone GDP for the fourth quarter of 2022 was also down -0.1% from an already forecast stagnation of 0% in the last quarter of 2022.

This downward revision is due to the decline in the entry into recession of the economic engine of the euro zone, Germany. Berlin admitted at the end of May to suffer a technical recession, penalized by the difficulties of its industry.

A total of eight countries in the European Union saw the biggest drop in GDP in the first three months of the year, with Ireland down 4.6%.As in Germany and Ireland, GDP also fell quarter on quarter in Lithuania, the Netherlands, Estonia, Malta, Hungary and Greece.

Recession was expected towards the end of last year as the eurozone grappled with high energy and food prices.Households in the single currency bloc have come under pressure from rising costs of living after the start of war in Ukraine triggered a sharp rise in gasoline prices and fueled the highest inflation rates since the creation of the euro zone.

The European Central Bank's monthly survey showed last month that people in the euro zone are not optimistic about inflation and that price pressures will remain strong for years to come.

If people expect price pressures to stay high for longer, it makes them more likely to push for higher wages and accept higher prices, which further fuels inflation, according to investigation.

Andrew Kenningham, chief economist for Europe, also said in a note on Thursday that consumer spending had been "hit hard" by the combination of high inflation and rising interest rates.“We suspect the economy will contract further over the remainder of 2023,” he said.