Euro zone GDP contraction slows in first quarter

Retail sales data, a proxy for consumer demand, fell more than expected in April, pointing to the continued weakness of private consumption at the start of the second quarter

The pace of the Euro zone's economic contraction slowed down quarter-on-quarter in the first three months of this year, the EU's statistics office confirmed on Wednesday, but retail sales in April pointed to continued weakness in household demand.

The European Union's statistics office confirmed its earlier estimates that gross domestic product in the 17 countries using the euro fell 0.2 per cent quarter-on-quarter in the January-March period, for a 1.1 per cent year-on-year contraction.

That came after a 0.6 per cent decline in Euro zone quarterly output in the previous three months.

The smaller fall in the first quarter of 2013 was mainly thanks to a stabilisation of inventories and household demand, which, unlike in the previous three months, did not weigh down the overall result.

But retail sales data, a proxy for consumer demand, fell more than expected in April, pointing to the continued weakness of private consumption at the start of the second quarter.

Retail sales in the Euro zone fell 0.5 per cent month-on-month in April for a 1.1 per cent year-on-year decline. Economists polled by Reuters had expected only a 0.1 per cent monthly fall and a 0.8 per cent annual contraction.

Eurostat data showed there was a positive contribution from Euro zone net trade in the first three months of the year but only because imports declined more than exports -another signal of very weak domestic demand.

The European Commission expects the euro zone to start growing again on a quarterly basis already from the second quarter, with a 0.1 per cent quarterly expansion forecast.