Germany’s economy shrank 1.7 per cent in the first three months of this year as lockdown measures to contain rising coronavirus infections left the eurozone on track to fall into a double-dip recession.

The decline in Europe’s largest economy, a reversal from growth of 0.5 per cent in the previous quarter, came as figures showed that Spain’s gross domestic product shrank 0.5 per cent due to declines in household consumption and manufacturing, while Italy’s output fell 0.4 per cent, dragged down by lower services sector activity.

But French GDP outshone expectations by growing 0.4 per cent in the first quarter, lifted by higher construction activity and a mild rebound in household consumption.

Eurozone GDP figures due to be published later on Friday are expected to log a 0.8 per cent fall, leaving the bloc lagging behind the US and China, which grew 1.6 and 0.6 per cent respectively in the first quarter. Most economists expect a quarterly contraction of UK output when its figures are released next month.

The eurozone economy suffered a record post-war recession in the first six months of last year as the pandemic first hit, and then dipped again in the final quarter of 2020 by 0.7 per cent. A fresh contraction in the first quarter would leave it in a second technical recession, defined as two successive quarters of negative output.

In Germany, falling household consumption offset higher manufacturing exports. Economists polled by Reuters had expected a decline in GDP of 1.5 per cent.

“The coronavirus crisis caused another decline in economic performance at the beginning of 2021,” the federal statistical office said. “This affected household consumption in particular, while exports of goods supported the economy.”

Germany tightened lockdown rules in much of the country this month, forcing many shops and schools to close again, after the federal government gave itself the power to override regional authorities that had not responded to rising coronavirus infections.

Since then, the number of new infections recorded daily has fallen to a two-week low, fuelling optimism that the recent acceleration in Covid-19 vaccinations and the stricter containment measures are helping to curb a third wave of infections. 

The German government this week raised its growth forecast for the year from 3 to 3.5 per cent, predicting a surge in consumer spending once restrictions are lifted. The country’s economy shrank 4.8 per cent last year — less than most of Europe’s other big economies — as the impact of the pandemic was cushioned by a surge in global trade that boosted its export-focused manufacturing sector.

This week more than 1.1m daily vaccinations were delivered in Germany. At least one jab has been given to more than 21.5m people, over a quarter of the population, boosting hopes that the infection rate will fall far enough to start easing the lockdown in May.

Expectations are rising that the eurozone will rebound strongly in the second quarter of this year, with consumers unleashing a wave of pent-up spending once countries start lifting containment measures and vaccinations continue to accelerate.

The European Central Bank forecasts growth of 4 per cent over the course of this year and a return to the economy’s pre-pandemic level in 2022 with growth of a further 4.1 per cent. 

French president Emmanuel Macron this week outlined a four-step plan to ease restrictions over the next two months. However, French household consumption fell sharply in March after tighter curbs were imposed. Despite a first-quarter rebound in French GDP, it remains 4.4 per cent below its pre-pandemic level.

“We do see a good recovery throughout the rest of this year, so that is very much, if you like, a two-sided story,” Philip Lane, ECB chief economist, told Dagens Industri TV on Thursday. “Looking backwards, the initial weeks have been very tough for many firms . . . and the fact we’re rebounding from the worst of it does not mean there’s a full recovery.”

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