BRUSSELS (Reuters) - The euro zone economy shrank more than expected in the first quarter, led by a drop in output in Germany, but economists said this was likely to be the worst quarter of the recession.
The European Union's statistics office Eurostat said on Friday the gross domestic product economy of the 16 countries using the euro shrank 2.5 percent quarter-on-quarter for a 4.6 percent contraction year-on-year -- the worst on record.
This followed a 1.6 percent quarterly and revised 1.4 percent annual contraction in the last three months of 2008.
Economists polled by Reuters had expected a 2 percent quarterly fall in output and a 4 percent annual contraction, marking the low-point of the worst recession in Europe since World war Two.
"We expect Q1 to be the trough of the recession across the area," Unicredit bank said in a research note.
The whole of the 27-nation European Union also saw its GDP fall 2.5 percent on the quarter and 4.4 percent year-on-year.
Europe's biggest economy, Germany, led the plunge with a 3.8 percent quarterly fall and a 6.9 percent annual drop, caused by a collapse in exports and investment.
France, Europe's second biggest economy, had a fall of 1.2 percent on the quarter and Italy, the next biggest economy, Italy had a fall of 2.4 percent.
Eurostat also confirmed euro zone inflation in April was unchanged at 0.6 percent year-on-year, in line with its earlier estimate and as expected by markets, after prices increased 0.4 percent month-on-month.
The European Central Bank wants to keep inflation below -- but close to -- 2 percent and cut its main refinancing rate to a record low level of 1 percent last week to help stimulate demand.
Eurostat said the core inflation measure which the ECB looks at closely in its policy decisions -- inflation excluding the volatile prices of unprocessed food and energy -- rose 0.4 percent on the month for a 1.7 percent year-on-year gain. This was up from 1.5 percent in March.
The biggest downward pull on the overall consumer price index month-on-month came from by falling prices of fuel and heating oil, telecoms, and dairy products. Package holidays, restaurants and cafes and electricity prices were pushing it up.
(Reporting by Jan Strupczewski, editing by Timothy Heritage)