Eurozone recession rumbles on
Eurozone GDP shrank by 0.2% in the first quarter of the year keeping the region in the longest recession since records began in 1995. Germany, the largest economy in the region, avoided recession but only managed a modest 0.1% growth. By contrast, France fell back into recession with a 0.2% decline, while Italian output contracted by 0.5%. The diverging fortunes of the three largest economies within the Eurozone highlight the issues faced by the ECB.
The UK labour market continues to paint a mixed picture. ILO unemployment rose by 15k to 2.52 million in the three months to March, while the jobless rate eased by 0.1% to 7.8%. In addition, there was a 7.4k fall in claimant count unemployment in April.
Japan’s economy expanded at the fastest rate in a year during Q1 as GDP rose at an annualised 3.5%. Consumer spending and export gains outweighed the weakest business investment since the March 2011 tsunami. This growth suggests the economy is shaking off the stagnation seen last year and is responding to the government’s stimulus plans.
EUR/USD slipped to a six week low of $1.2842 after the weaker than expected GDP raised expectations of further monetary easing by the ECB. Sterling also made gains against the euro breaking through the €1.18 level to a high of €1.1855.