Eurozone GDP declined for the sixth successive quarter in Q1 2013, falling by -0.2%, according to provisional estimates released by Eurostat today. This underlines that, while concerns over the sovereign debt crisis have eased considerably since late last year, the real economy remains fragile. The economic weakness of Europe’s periphery is a familiar trend, but it is also notable that core European countries such as Germany and France are now also struggling to find growth. 

Key points from today’s data include:

• France has entered a technical recession, having recorded contractions of -0.2% in both of the last two quarters.

• Germany avoided entering a recession by the narrowest of margins in Q1, growing by just +0.1%.

• Apart from Germany, the only other Eurozone countries to report positive growth in Q1 were Belgium (+0.1%) and Slovakia (+0.3%).

• Spain and Italy each contracted by -0.5% in Q1. In both cases, this was actually an improvement on Q4 2012.

 

 

The outlook for the rest of 2013 appears weak, with the European Commission forecasting a contraction in the Eurozone of -0.4% for the year as a whole. This has negative implications for rental growth in European office markets, as Knight Frank data shows that there is a close correlation between GDP growth and movements in prime office rents.

European office rents appear to have plateaued in most major markets, while they have already fallen from their peak in Paris. There appear to be limited prospects for rental growth in most European office markets over the rest of 2013.

However, Germany saw its GDP figure return to positive territory in Q1, and the economics ministry last month raised its full year output forecast from 0.1% to 0.5%.