LONDON (AP) — The European economy contracted slightly at the end of last year and beginning of 2023, revised figures showed Thursday, underlining the impact of the loss of Russian natural gas and high inflation on consumer spending.
Economic output in the 20 countries that use the euro currency dropped 0.1% in both the final three months of 2022 and first three months of this year from the previous quarters, according to the European Union’s statistics agency Eurostat.
That means the eurozone endured two consecutive quarters of decline, which is one definition of recession often used in political and economic discussions, dubbed a “technical” recession.
However, the economists on a panel that declares eurozone recessions use a broader set of data, including unemployment figures. And European labor markets have held up to recent economic shocks: Unemployment is at its lowest level since before the creation of the euro in 1999, hitting 6.5% in April.
The small shift in numbers doesn’t change what households already are experiencing: rising prices at the grocery store, paying more interest on their mortgages as the European Central Bank hikes rates and struggling for wages that keep up with the rising cost of living.
“Maybe before I used to buy more products I didn’t need, like potato chips for example,” Milo Taneron, a 26-year-old youth social worker, said while shopping in a Paris supermarket recently.
“Now, for certain products, I’ve been forced to buy from low-cost brands, to drop down a level to be able to buy these products,” Taneron said.
With inflation and high interest rates hitting households hard and forcing them to cut back on spending, some analysts say they expect the economy to contract further this year. But the Organization for Economic Cooperation and Development said this week that it expects meager growth of 0.9% in the euro area in 2023.
Bert Colijn, senior eurozone economist for ING bank, said “it’s hard to argue that this is a recessionary environment” because the decline was so small and job market is so strong.
“Overall, the eurozone economy is very much back to muddling through,” he said in a note.
In the United States, economic growth has slowed to a lackluster 1.3% annual rate from January through March, but consumer spending has risen and the job market is hot. Most economists don’t think the U.S. is headed for a recession anytime soon, and if one occurs, it’s likely further away than many of them had previously thought.
In Europe, the economic crunch came as Russia’s war in Ukraine set off an energy crisis last year. Moscow cut off most of its natural gas exports to the continent, which relied on those supplies to generate electricity, power factories and heat homes.
