Europe’s economy contracted at the fastest pace in at least 13 years in the first quarter as companies cut output and jobs to survive the worst global slump in more than six decades. Gross domestic product in the 16-member euro region dropped 2.5 percent from the fourth quarter, when it fell 1.6 percent, the European Union’s statistics office in Luxembourg said today. That’s the biggest drop since the euro-area GDP data were first compiled in 1995 and exceeded the 2 percent decline economists expected in a Bloomberg News survey. Inflation held at 0.6 percent in April, a separate report showed. The deepest global recession since World War II is curbing European exports and eroding consumer demand, forcing companies to cut spending and jobs. The German and Italian economies also contracted by the most on record in the first quarter. Hong Kong ’s economy shrank at the fastest pace since at least 1990, prompting the government to forecast a full-year contraction of as much as 6.5 percent. "The recession is an exceptionally deep one," said Kenneth Wattret, chief euro-region economist at BNP Paribas in London. "The headwinds to growth are considerable, consistent with output contraction and sharply rising unemployment for some time to come." From a year earlier, the euro-area economy shrank 4.6 percent, also the biggest drop on record, today’s report showed. The statistics office is scheduled to publish a breakdown of first-quarter GDP on June 3. The European Commission on May 4 cut its outlook to project a contraction of 4 percent this year and 0.1 percent in 2010. In Germany, Europe’s largest economy, GDP dropped 3.8 percent in the first quarter from the previous three months. That’s the biggest drop since data were first compiled in 1970. Italian GDP fell 2.4 percent, the most since records began in 1980, and the French economy shrank 1.2 percent in that period. The economies of the Netherlands and Austria also contracted, Bloomberg reports. Meanwhile, reports in London that Barclays PLC is discussing the possible sale of its Barclays Global Investments unit caused its shares to rise as much as 9 percent. The Financial Times said Barclays was discussing a potential $10 billion sale of the unit with New York-based BlackRock Inc. Stock markets were also higher in Asia, where investors were encouraged by data showing Japanese machinery orders in March fell less than expected.