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Europe economy slides back into recession as US rolls ahead

Friday, April 30, 2021 | David Mchugh, AP Business Writer


In this March 18, 2021 file photo, empty tables are seen on a deserted square in normally very busy old town of Cologne, Germany, Thursday. The European Union statistics agency Eurostat announces first-quarter growth figures for the 19 countries that use the euro. (AP Photo/Martin Meissner)

FRANKFURT, Germany (AP) — Europe's economy shrank 0.6% in the first three months of the year as slow vaccine rollouts and extended lockdowns delayed a hoped-for recovery and underlined how the region is lagging other major economies in rebounding from the coronavirus pandemic.

The fall in output was smaller than the 1% contraction expected by economists but still far short of the rebound underway in the United States and China, two other pillars of the global economy.

U.S. growth figures announced Thursday showed the U.S. grew 1.6% during the first quarter, with business supported by strong consumer demand. On an annualized basis, the U.S. grew 6.4%.

The second straight quarter of falling output in Europe, following contraction in the fourth quarter of 2021, confirms Europe’s double-dip pandemic recession after a rebound in growth in the third quarter. Two quarters of falling output is one definition of a recession.

France showed unexpected growth of 0.4% compared to the quarter before, while the main negative surprise came in Germany, the continent's largest economy, where activity shrank by a larger than expected 1.7% as the manufacturing sector was hit by disruption of parts supplies on top of the hit to services and travel from pandemic-related restrictions on activity.

Economists said they expected an upturn in the coming weeks as vaccinations accelerate.

One factor in Europe is a slow vaccine rollout and prolonged lockdowns. Another is less government support for the economy. U.S. President Joe Biden's $1.9 billion relief package, coupled with spending from earlier support efforts, will mean additional cash support of about 11-12% of annual economic output for this year, according to economists at UniCredit bank. By contrast, the European fiscal stimulus amounts to about 6% of gross domestic product.

China was hit first by the pandemic but got it under control through strict public health measures and was the only major economy to grow in 2020. The U.S. was hard hit by the virus but has rolled out vaccinations at a rapid pace.

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