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WRAPUP 2-Europe recession deepened in Q1, may be low point

Published 05/15/2009, 06:38 AM
Updated 05/15/2009, 06:40 AM

* European Q1 GDP worst on record and worse than U.S.

* German drop biggest since reunification, France milder

* Economists say first-quarter was probably low point (Updates with EU data, additional quotes and details)

By Brian Love, European Economics Correspondent

PARIS, May 15 (Reuters) - Europe sank to what may be the recession's low point in the first quarter of the year as tumbling German exports and investment plus further sharp drops in output elsewhere sped up the pace of a year-old contraction.

Offical estimates on Friday showed the first quarter was the worst on record at European level, although more up-to-date business surveys suggest that early 2009 may prove to be the low point of the first global recession since World War Two.

"Although we are nowhere near the peak in unemployment, we can safely assume that the first quarter was the worst in terms of the pace of decline," said Martin van Vliet, an economist at ING bank.

"The latest ugly GDP figures should, however, mark the trough of the current 'Great Recession', said Alexander Koch, an economist at UniCredit bank.

GDP fell 2.5 percent versus the last quarter of 2008, both at the level of the 16-country euro currency zone and the broader 27-country European Union bloc, according to the EU statistics office.

German GDP fell more than any quarter since reunification of the country in 1990, with GDP falling far more than forecasters had even imagined, diving 3.8 percent from the last quarter of 2008, official statistics showed.

French GDP slid heavily too if less dramatically -- by 1.2 percent compared to the previous quarter, official figures showed, while Italian GDP fell 2.4 percent, the sharpest dip since 1980.

Economists had forecast a bad but less dramatic fall of 2.0 percent in euro zone GDP, after a drop of 1.6 percent in the previous quarter and the declines in several eastern European countries outside the euro zone were no less startling.

Czech and Hungarian GDP reports showed the biggest drops since their records began.

LIKE OTHER REGIONS, BUT WORSE

Europe's plight is shared by the industrialised world and even fast-developing China showed its weakest pace of growth on record in the first quarter.

U.S. GDP slid for the third straight quarter for the first time since the oil crisis recession of the mid-1970s, according to official data published on April 29.

The drop of 6.1 percent in the U.S. method of counting equates to a fall of a bit more than 1.5 percent in European measures, suggesting the first quarter there, while bad, was not quite as bad as in Europe.

Britain, which is not in the euro zone but depends heavily on its euro neighbours for trade, reported the biggest quarterly GDP drop since 1979 in the first quarter, when GDP contracted 1.9 percent from the previous quarter. That estimate was issued on April 24.

In all, while the figures are provisional and U.S. data is often subject to heavy revision, the picture emerging from the first quarter is that GDP was dire across the board, but worse in mainland Europe.

The first quarter drop eased in the United States from the preceding quarter while it accelerated in the euro zone and Britain but the euro zone and broader EU drop was bigger than Britain's too.

More detailed information on GDP is expected on May 20 from Germany and many other mainland European countries as well as a first estimate from Japan, though polls of economists say Japanese GDP could have been the worst since World War Two in the opening quarter of 2009.

Global GDP is expected to contract 1.9 percent in 2009 as a whole, according to the International Monetary Fund, which sees U.S. GDP dropping 2.8 percent, euro zone GDP 4.2 percent, Japanese GDP 6.2 percent and British GDP 4.1 percent, alongside a slowing in China to 6.5 percent growth from 9 percent last year. (With reporting from bureaux across Europe; editing by Stephen Nisbet)

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