Economic growth in Greece is slowing, alongside falling consumer spending, which is contributing to weakness in the euro. Greece's currency is represented by CurrencyShares Euro Trust (NYSEARCA:FXE).
In the first quarter, the economic growth figure came in at an annual pace of 0.2%, below the previous quarter's reading of 1.2%, while also missing estimates for 0.3%. While economic growth has recovered the past few years, it is only slightly above 0%, seen below. On a quarterly basis, Greece slipped back into recession as the country continues to battle political strife with its European creditors.
"The data showed that the economy slipped back into recession as political turmoil put the brakes on a fragile recovery.
Greece's economy emerged from a six-year recession last year, but has struggled in recent months as political turbulence turned towards the end of last year, triggering early elections that brought the anti-austerity leftists to power," according to Reuters.
Moreover, consumer spending has seen a similar decline. In March, the retail sales figure came in at an annual pace of 1.2%, above the previous quarter's revised reading of -1.7%, while also exceeding estimates for 1.06%. While consumer spending recovered the past few years, it is still only slightly expanding, seen below. Much like overall economic growth, political uncertainty has weighed on consumer sentiment.
"Sales volumes had risen for five months in a row through October on a pickup in consumer spending as the economy recovered from a protracted recession. But a turbulent political climate towards the end of last year hit consumer sentiment," according to Reuters.
Finally, another factor weighing on Greece is continued slack among its labor force. In the fourth quarter, the employment figure came in at an annual pace of 0.68%, above the previous quarter's reading of -0.54%. While the growth rate has accelerated higher, the overall level of employed remains low. Since 2008, close to 25% of workers have been removed from the labor force, meaning there is still a lot of room for improvement, seen below.
Greece's economy is still in need of support. Economic growth is growing at low levels, while consumer spending slowed in recent months. Additionally, a large number of people in the economy are out of the labor force. With Greece still in need of monetary and fiscal support, it should remain a needle in the side of the euro, keeping it suppressed in coming months.
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