Preliminary figures released on Friday showed that the Eurozone economy grew by a meagre 0.1% during the first quarter of this year, failing to meet analyst expectations of 0.2% quarterly growth. While France’s GDP picked up by 0.2%, Germany’s GDP flatlined over the period, which led Deutsche Bank economists to reiterate their call for 0% GDP growth in Germany for the year. Meanwhile, Irish GDP dropped by 2.7%, and Portugal’s economy grew by 1.6%.
The statistics agency Eurostat revised down its fourth-quarter 2022 GDP estimate for the Eurozone from 0.1% quarterly growth to zero. The economy had expanded by 1.3% on an annual basis, slightly missing the 1.4% outlook. The slight growth signal is coming as economic performance is contending with persistently high inflation. Energy prices have been a significant driver over the past year due to European consumers progressively losing access to Russian supplies following Moscow’s full-scale invasion of Ukraine.
The fall in wholesale energy prices, warmer-than-expected weather, and fiscal stimulus helped the Eurozone avoid a widely feared recession over the winter. However, significant disparities exist between individual countries, and the future growth of the bloc will be impacted by an ongoing race between positive momentum in industry and wage growth, and European Central Bank monetary tightening and US recession risks.
The GDP figures will be closely watched ahead of the European Central Bank’s meeting on 4 May, which seeks to address headline inflation of 6.9% and core inflation at a record high of 5.7%. Some policymakers have stressed they believe they have further to go on interest rate rises as they consider a 25 basis point or even 50 basis point hike next week.
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