News that GDP contracted in Q1 after all means that the euro-zone has already fallen into a technical recession. We suspect that the economy will contract further over the rest of this year.

Data released today show that euro-zone GDP contracted by 0.1% q/q in Q1 rather than having expanded by the same amount, as previously thought. This did not come as a surprise given that Germany and Ireland had already announced large downward revisions: it was in line with forecast although below the consensus forecast.

The expenditure breakdown, which was published for the first time today, confirms that domestic demand has been hit hard by the combination of inflation and rising interest rates as household consumption declined by 0.3% q/q following a 1.0% fall in Q4. Government consumption also fell sharply (by 1.6% q/q) and exports were broadly unchanged while imports fell.

Today’s data mean that the euro-zone has experienced two successive quarters of negative GDP growth and therefore met the standard definition of a recession – albeit only by a fraction and partly thanks to a big fall in Ireland’s GDP data which don’t give an accurate picture of the underlying situation.

The big picture, however, is that the euro-zone economy was broadly stagnant during the past two quarters – and analysts think GDP is likely to contract again in Q2 as the effects of monetary policy tightening continue to feed through.