Eurozone economy falls into decline as reduced Irish GDP sees data revised

In Ireland, the multinational sector in Ireland shrank 27% in Q1

A detail of a Euro banknote, on March 4, 2016 in London, England. Photographer: Jim Dyson/Getty Images Europe

The eurozone economy shrank at the start of the year after the contraction of GDP in Ireland forced a revision to data that originally showed feeble growth.

Gross domestic product fell 0.2% between January and March, Eurostat said on Friday, compared to an earlier estimate of 0.1% growth. That’s mainly due to a sharp downward restatement of Irish GDP, which slumped 12.1% rather than the 2% previously measured.

While the large number of multinationals based in Ireland often contorts data for the overall euro area, the huge first-quarter drop makes it even harder to work out where the region’s economy is heading. That complicates the European Central Bank’s task in assessing the fallout from the Iran war and calibrating the appropriate monetary-policy response.

Officials have widely signaled a first interest-rate hike since 2023 at next week’s meeting, arguing they can no longer look through the energy shock that already drove euro-area inflation to 3.2%. However, some officials also worry higher oil and gas prices will derail the nascent recovery.

Business activity in the region already fell over the past two months, with the contraction in May even reaching the quickest pace since 2024.

Earlier this week, the OECD said the euro area will grow just 0.8% this year and warned that “recent indicators suggest deteriorating sentiment.” Aside from the Irish data, statistics in bigger economies have also been revised in recent days. French GDP fell, while Italy’s was better than previously reported.

In Ireland itself, the multinational sector in Ireland shrank 27% in the period. But underlying data showed a far more positive picture. Modified domestic demand — a more accurate measure of the economy — grew 0.6%, driven by personal spending.