The European economy shrinks as the US and China regain power Business and Economic News

The European economy shrank 0.6 percent in the first three months of the year as slow vaccine deployments and long blockages delayed the recovery of hope, and highlighted how the region lags behind other major economies in the rebound of the coronavirus pandemic.

The decline in output of the 19 countries that use the euro currency was less than the 1 percent contraction expected by economists, but it was still a long way from the rebound that began in the United States and China, the other two pillars of the global economy.

Figures announced on Thursday showed that the U.S. economy grew by 1.6% in the first quarter, and by 6.4% annually, as strong consumer demand supported businesses.

In Europe, it was the second consecutive quarter of production, which is where the region fell into recession despite a rebound in growth from July to September last year. The latest data covers the quarter ended March 31 and economists say the economy is on the verge of rising.

France had an unexpected growth of 0.4 percent compared to the previous quarter, but the main negative surprise occurred in Germany, the largest economy on the continent. There, activity fell by 1.7% less than expected, as the manufacturing sector was forced to disrupt the supply of highly successful parts for services and travel due to pandemic-related activity reductions.

French authorities expect the country’s COVID-19 forecast to be better next month, when a larger proportion of the population will be included. The government has slowly begun to lift partial blockades, even with coronavirus cases and numerous hospitalized COVID-19 patients. President Emmanuel Macron said on Thursday that the outdoor terraces of French cafes and restaurants will be allowed to reopen on May 19 under certain conditions along with museums, cinemas, theaters and concert halls.

Concerns that could arise in the run-up to the second consecutive holiday have blurred the hopes of Italian, Spanish and Greek Mediterranean countries based on tourism. Greece has canceled quarantine restrictions for visitors from European Union countries and will allow restaurants and cafes to reopen for external service from 3 May. Travel receipts sank 75% last year.

Economists said they expected the rise in the coming weeks as vaccines accelerated. The International Monetary Fund forecasts year-on-year growth of 4.4% for the eurozone.

“Today’s GDP [gross domestic product] first-quarter data suggest direct resistance to the bloc’s economy and send encouraging signals about the short-term outlook, ”economist Maddalena Martini told Oxford Economics.

Katerina Grapsa, owner of an ornamental store in Athens (Greece), has expressed optimism that her products include candles for the Orthodox Easter Sunday.

“From now on we hope things will improve, because of vaccines, because of measures,” he said. “If tourism doesn’t come and bring us COVID but they leave us money, it will be much better.”

Andreas Iosifidis, an egg seller at the Athens produce market, said: “It’s better because it was unprecedented last year. This year, it’s getting a little over, and we’re used to it, and we go out shopping. ”

So far, the European unemployment rate has risen steadily in March to 8.1 per cent, thanks to extensive support programs that help companies retain workers. The US saw its unemployment rate fall to 6.0% after rising to 14.8 per cent in the worst of the pandemic.

The main factor preventing the recovery in Europe is the slow spread of vaccines, which has led to long blockages. Another is lower fiscal support for the economy from new government spending. According to economists at UniCredit Bank, the US President Joe Biden’s $ 1.9 trillion relief package, along with the cost of previous aid efforts, will bring in additional funding of about 11-12 percent of this year’s economic output. In contrast, the European fiscal stimulus is about 6% of GDP, even if the wider European social network is taken into account.

China was first affected by the pandemic, but took control of it through strict public health measures and was the only major economy to grow in 2020. The US hit the virus hard but the vaccines spread rapidly.