The economic downturn in the eurozone has continued in the first quarter of 2001. In its weekly report 26/2001 the DIW Berlin concludes that the seasonally adjusted real gross domestic product has only increased by 0,5 % in the first quarter of 2001; which boils down to an annual growth rate of 2%. The accelerated rise in prices, which was a bar to the spending power of private households and investments, led to an economic slow-down. Yet, the downward trend of the US economy is an additional drain on the European economy. Consumer confidence and growth indicators suggest that economic growth will even continue to decelerate.
All components of the gross domestic product, except private consumption, indicate a further slow-down of economic growth. Despite a weak Euro exports have only slightly increased, and imports decreased. Net exports have risen by 0,2% over the last quarter. At the same time domestic demand has increased by 0,3%. Investments activities were at a particularly low level. Fixed asset investments have even fallen off. According to the DIW Berlin, this can mainly be attributed to the difficult international economic situation and a rigid financial policy which weakens the businesses' financial standings. Industrial production also decreased by 0,5%.
Calculations of the DIW Berlin indicate that despite general assessments a slowdown in growth will not only affect Germany but other member states of the EU. After having reached 2,5% in the last quarter of 2000 economic growth has decreased to 2% in the first quarter of 2001 in France. In the Netherlands the growth rate was even cut by half to 1,2%.
Consumer prices increased to 2,6% over the last quarter. However, this is basically a temporary jump in prices. The DIW Berlin reckons that prices will soon be going down provided that the upward trend in prices does not lead to an excessive increase in wages.