Eurozone: Everything points to much bigger hit in Q2 – Nordea

The Eurozone economy shrank 3.8% q/q in Q1, as containment measures shut down large parts of activity in the region in mid-March. Most of the corona effect will come in Q2, analysts at Nordea brief.

Key quotes

“Eurozone GDP declined by 3.8% q/q and 3.3% y/y in the first quarter of 2020. GDP declined 5-6% both in Spain and in France.”

“The decline shows only a small part of the chaos caused by the corona virus because in many countries, the corona crisis hit only in the middle of March and most of the first quarter can still be qualified as a pre-crisis period. Thus, we expect to see a much more dramatic decline in the second quarter.”

“Eurozone unemployment for March rose marginally to 7.4% from 7.3% in February, mainly thanks to a jump in Spain. The official unemployment numbers may be misleading when it comes to the labour market developments during the corona crisis.”

“Headline inflation in the Euro area slumped to 0.4% y/y in April according to the flash estimate. Core inflation was 0.9% y/y, just slightly down from 1.0% in March.”