The economy of the Euro zone leaves growth of 0.1% in the first quarter
Skyscrapers in the city center can be seen from the Lohrberg in the north of Frankfurt. Photo: Arne Dedert / dpa (Photo by Arne Dedert / photo alliance via Getty Images)
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The euro zone economy grew a modest 0.1% in the first quarter of the year, preliminary figures showed on Friday, even as Germany’s GDP grew flat over the period.
The print came in below analysts’ expectations, with a Reuters poll of economists previously forecasting quarterly growth of 0.2%. The economy expanded 1.3% annually, just missing a 1.4% target.
Earlier this month, statistics agency Eurostat revised its fourth quarter 2022 GDP estimate for the euro zone from 0.1% quarterly growth to no growth, following 0.4% growth in the third quarter. .
The modest growth signal in the first quarter comes as economic performance comes up against persistently high inflation. Energy prices have been a key driver over the past year, as European consumers gradually lose access to Russian supplies due to Moscow’s full-scale invasion of Ukraine. Carsten Brzeski, global head of macro at Dutch bank ING, said the fall in wholesale energy prices, warmer-than-expected weather and fiscal stimulus had helped block fears of a recession over the winter. .
But he noted large differences between individual countries, and said that future growth would be affected by a continued race between positive industrialization and wage growth on the one hand, and Central Bank monetary tightening Europe and US recession risks on the other hand.
Europe’s major economies were mixed in their performance in the first quarter, national figures showed on Friday. The German economy came to a standstill over January-March, compared to the previous three months. It was up 0.2% on an annual adjusted basis and down 0.1% on an unadjusted basis due to one extra working day in the previous year, German statistics agency Destatis said.
Deutsche Bank economists said Germany had avoided a technical recession by “a hair’s breadth” and reiterated their call for 0% GDP growth this year, with the economy held back by high inflation, rate hikes and expected second half declines.
Meanwhile France’s GDP rose 0.2% in the first quarter, Insee statistics showed, despite several widespread strikes that slowed activity in protest against the President’s planned pension reforms Emmanuel Macron.
Ireland’s GDP was a particular weak point, shrinking by 2.7% on the previous quarter, while Portugal’s economy grew by 1.6%.
GDP figures will be closely watched ahead of the ECB’s May 4 meeting, which is trying to tackle headline inflation of 6.9% and headline inflation at a record high of 5.7%.
Some ECB policymakers have confirmed that they believe they have further to go on raising interest rates as they are predicting a 25 basis point or even a 50 basis point increase next week. The collapse of several lenders in March across the US and Europe and turmoil in the banking sector had raised questions about whether central banks would have to cut their interest rates or walk back.
The ECB recently raised its three main interest rates by 50 basis points in March, bringing the main rate to 3%.
Nerves on the European front have largely calmed and officials have reinforced the sector’s strength, although the shadow of investment flights and further volatility remains.