BRUSSELS (Reuters) -The euro zone economy dipped into a second technical recession after a smaller than expected contraction in the first quarter, but economists said it was now firmly set on a recovery path as pandemic restrictions were lifted amid vaccination campaigns.

The European Union’s statistics office Eurostat said gross domestic product in the 19 countries sharing the euro contracted 0.6% quarter-on-quarter for a 1.8% year-on-year fall.

This put the single currency area in a second technical recession in 12 months, after a 0.7% quarterly GDP fall in the last quarter of 2020. Economists polled by Reuters had expected a 0.8% quarterly and a 2.0% annual decline.

“Slightly better than expected, but a technical recession nonetheless … as GDP fell again in 1Q,” said Bert Colijn, senior euro zone economist at ING bank.

“Underlying resilience shows that the economy is set for its (somewhat late) start to the pandemic rebound though, meaning that the picture of a lacklustre eurozone economy is set to change quickly,” he said.

“Domestic demand is set for a strong rebound when economies reopen and the manufacturing recovery seems to only be limited by its own supply at the moment. While late out of the starting blocks, the eurozone is set for its start to the pandemic rebound,” he said.

The euro zone’s first quarter contraction was mainly caused by a 1.7% quarterly slump in its biggest economy Germany, though mitigated by 0.4% quarterly growth in second biggest France.

“The recession is a thing of the past. With progressive vaccinations and a seasonally slower spread of the coronavirus, infection figures should continue to fall in the coming weeks,” said Christoph Weil, senior economist at Commerzbank.

Separately, Eurostat estimated euro zone consumer prices rose 0.6% month-on-month in April for a 1.6% year-on-year gain, as expected by economists polled by Reuters.

The rise was mainly caused by a 10.3% year-on-year surge in energy prices, which offset the 0.4% year-on-year fall in the costs of unprocessed food.

Without these two most volatile components, or what the European Central Bank calls core inflation, prices rose 0.5% month-on-month for a 0.8% year-on-year increase, a deceleration from the 1.0% year-on-year core inflation rate the month before.

The core inflation drop reinforces calls by European Central Bank doves to maintain the stimulus to the economy and hold off on tapering the pandemic bond purchases until the growth rebound fully materialises.

“The ECB will be challenged significantly in terms of communication over the coming meetings. With inflation approaching 2%, once GDP growth jumps on the back of reopenings it will become key for the ECB to get the message across that inflationary pressures look to be transitory for now,” ING’s Colijn said.

Eurostat also said that euro zone unemployment fell in March to 8.1% of the workforce, or to 13.166 million people, from a downwardly revised 8.2% in February or 13.375 million people, defying expectations of a rise to 8.3%.

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