The economy in Europe has plummeted. It's just numbers for households that are hurting.
FILE - Germany's second largest refinery, BP, is in Gelsenkirchen, western Germany, on Jan. 30, 2023. The European Union's executive body increased its economic growth forecast, saying Europe had dodged a winter recession that was feared amid an energy crisis. The economy is likely to lose its ability to spend because of the stubbornly high inflation that is likely to keep the economy soaring. The European Commission said in a spring forecast on May 15, 2023, that it expects a 1.1% improvement in economic growth this year. The EU's economy was slightly contractionary at the end of last year and beginning of 2023, according to revised figures, underlining the impact of the loss of Russian natural gas and high inflation on consumer spending.
The figure for the euro currency is down from zero to minus 0.1% for the fourth quarter of the 2022 period. The figure for the first three months of this year also was downgraded from scant 0.1% growth to minus 0.1%.
The Eurozone has seen two consecutive quarters of declining output, a term commonly used in political and economic discussions, dubbed a technical recession.
The economists on a panel that declares recessions use abroader set of data, including unemployment figures. European labor markets have held up relatively well to recent economic upheavals. The unemployment rate has been at its lowest since the euro's creation in 1999, with the rate of unemployment peaking at 6.5% in April.
The small shift in numbers doesn t change what households already were experiencing, with rising prices at the grocery store, paying more interest on their mortgages and struggling for wages that keep up with the rising cost of living.
The last update from the euro area business cycle dating committee, which was published March 27 and only dealt with data through the end of last year, said there had been no recession as falling consumer spending was statistically offset by a significant reduction in imports.
The committee added, The output growth pause contrasts with a continued, robust expansion in employment and that it would continue monitoring and commenting on developments. German figures show Europe's biggest economy unexpectedly shrank in the first three months of this year, marking its second quarter of contraction. Russia was one of the countries that depended heavily on natural gas.
Europe's dependence on war-torn Ukraine led to Russia's loss of most of its natural gas, which the continent relied heavily on to generate electricity, power plants and heat homes.
The surge in prices of energy for consumers and businesses surged, driven inflation to record levels, and raised fears of rationing and blackouts. Governments and utilities scrambled to line up alternative supplies of liquefied natural gas shipments from countries like the U.S. and Qatar, avoiding the disastrous utility shutoffs that had been feared last year.
The cost of energy has since dropped to levels seen before Russia invaded Ukraine, but recurring inflation and higher interest rates that the European Central Bank uses to tackle price hikes have influenced economic growth by making credit for house purchases or business expansion more expensive.
At its June 15 meeting, the ECB is expected to continue its series of rate increases with a quarter-point hike, and keep the door open to raise further beyond that.