Europe Avoids Q1 Recession Thanks To Strong Exports And Weak Euro

Tyler Durden's picture

When in doubt: crush your "common" currency by keeping your "partners" on the verge of bankruptcy, and export, export, export. After contracting by 0.3% in Q4 for both the Euroarea (of 17 countries) and the EU27, just released data from Eurostat indicated that in Q1, GDP for both "areas", but notably the Eurozone, was flat quarter over quarter courtesy of... strong exports. Which in turns shows just why various countries in the Eurozone (coughgermanycough), namely those who actually are relevant in the GDP calculation, seek to benefit greatly from the perception that Europe is on the brink, and the EUR is sliding as a result, further promoting exports, and thus, growth. As a result, because technically it avoided two consecutive quarters of contraction, the Eurozone has avoided the dreaded recession. For now. Expect further speculation that Europe is imploding, continuing to benefit solely the one export powerhouse of Europe: Germany.

From Reuters:

Strong exports saved the euro zone from a recession in the first quarter, offsetting a plunge in investment and inventories, data showed on Wednesday, as the EU statistics office confirmed gross domestic product was flat in January-March quarter-on-quarter.

 

The European Union's Statistics Office did, however, revise down its previous estimate of the year-on-year GDP growth in the first quarter, to a contraction of 0.1 percent from a flat reading.

 

The data comes as the European Central Bank meets to discuss interest rates. Economists expect no policy moves on Wednesday, but possibly an indication of readiness to cut rates as early as next month, given a weakening economy and Spain's banking troubles.

 

The output of the 17 economies that make up the euro zone contracted 0.3 percent in the last quarter of 2011 against the previous three months and, if the economy were to have shrunk for a second consecutive quarter, the euro zone would be in recession.

 

Eurostat said exports contributed 0.5 percentage points to the final quarterly GDP figure, offsetting falls in investment and inventories, which took away 0.3 percentage points and 0.2 percentage points respectively.

 

Eurostat data showed Spain, the Netherlands, Portugal, Greece, Italy, Cyprus were in recession after two, or more, consecutive quarters of shrinking growth.

Of course, had Eurostat calculated some of the biggest contractors in the quarter, namely Ireland and Greece, instead of leaving them out of the calculation, the final result would have not been quite as palatable.

Here is what EU-27 GDP in Q1 looked like:

That said, even with ongoing EUR weakness, it is hardly likely that Q2 European GDP will be "flat" following disastrous European PMIs for the past 3 months, just released Spanish Industrial output for April which collapsed by 8.3% on expectations of a -6.5% print, the most since October 2009, as well as German Industrial production crashing 2.2% in April, on expectations of a -1% print.

Slowly the real recession, cooked statistics aside, is becoming a very real depression.