Portugal Colonial - Irish slump drags eurozone economy into red in first quarter

The economy 21-country eurozone shrank 0.2 percent compared to the previous three-month period, according to the EU's statistics agency, which had earlier estimated first quarter growth to be near-flat at 0.1 percent.

The unusually steep downward revision was due to a sharper-than-estimated contraction in Ireland -- where economic activity fell 12.1 percent compared to an initial forecast of two percent.

Ireland's statistics office, the CSO, said Thursday the exceptional revision was due to the incorporation of data related to multinational companies, which carry significant weight in the Irish economy.

France's performance was also revised down at the end of May, with GDP falling by 0.1 percent in the eurozone's second-largest economy instead of the flat reading previously reported by statistics agency Insee.

"Excluding the effect of Irish GDP, Eurozone growth remains remarkably steady at around 0.2 percent per quarter," noted Rory Fennessy of Oxford Economics.

That said, the outlook for the eurozone remained lacklustre as the Middle East war and subsequent energy shock take their toll on the region's economy, with no end in sight.

All indications are "that the worst of the impact on growth from the current supply and inflation shock is yet to come," Fennessy wrote.

The analyst noted that first quarter growth was likely boosted by companies "frontloading" purchases to try to get ahead of supply disruptions due to the conflict, as well as by defence spending.

And he predicted that effect to dissipate in the second quarter, leading eurozone GDP excluding Ireland to stagnate in the spring.

X.Brito--PC