Eurozone escapes recession as France, Spain, Germany and Italy beat growth forecasts – business live

Although 0.3% quarterly growth isn’t exactly stellar, it’s the eurozone’s strongest quarterly growth since the third quarter of 2022, early in Europe’s energy crisis.

Bert Colijn, ING’s senior eurozone economist, says the eurozone economy has clearly entered a better phase with economic recovery, low unemployment and more moderate inflation.

Lower energy prices, following the surge in oil and gas after Russia’s invasion of Ukraine in 2022, are helping the economy.

Colijn explains:

The economy is profiting from a more stable energy supply, with costs having substantially eased, resulting in lower inflation. Wage growth, in turn, has accelerated to make up for lost purchasing power, which is currently benefiting consumers.

We have yet to get the details, but judging from what’s happening in France, we see that household consumption led the way

The eurozone is set to grow faster this year than in 2023, predicts Sam Miley, managing economist at the Centre for Economics and Business Research:

“This morning’s confirmation of quarterly growth in Q1 has put an end to a short-lived recession in the Eurozone, with the economy having turned a corner since the beginning of 2024.

Prospects are likely to improve further throughout the year, driven by the expectation of interest rate cuts. Further data released this morning showed that inflation has now stood within one percentage point of target for seven consecutive months, suggesting a suitable environment for the European Central Bank to consider adopting looser monetary policy.

Such policy changes will support growth this year. Cebr expects the Eurozone economy to expand by 0.6% in 2024, up from 2023’s growth figure of 0.4%.”

Inflation across the eurozone was unchanged in April.

Eurostat reports that consumer price inflation was 2.4% per year, matching March’s reading.

Services inflation did slow, to 3.7% from 4% in March, but food, alcohol & tobacco inflation picked up to 2.8% from 2.6%.

Non-energy industrial goods prices rose by 0.9%, down from 1.1%.

Energy has less of a deflationary effect, though, with prices down by 0.6% year-on-year, from -1.8% in March.

Disappointingly, core inflation fell by less than expected. Inflation, stripping out energy, food, alcohol & tobacco, fell to 2.7% per year in April, down from 2.9%, but ahead of forecasts of a larger fall to 2.6%.

NEWSFLASH: The eurozone has escaped recession, and beaten forecasts for growth at the start of this year.

GDP across the eurozone expanded by 0.3% in January-March, statistics body Eurostat reports.

This means the eurozone’s shallow recession is over – its GDP shrank by 0.1% in both the third and fourth quarters of last year, which was a technical recession.

Eurozone growth has been held back by high interest rates, as the European Central Bank has battled inflation, while the cost of living crisis hit consumer spending.

Euro area GDP was lifted by stronger-than-expected growth in Germany, France, Italy and Spain (as we’ve been blogging since early this morning).

The wider European Union also grew by 0.3%.

Eurostat says:

Ireland (+1.1%) recorded the highest increase compared to the previous quarter, followed by Latvia, Lithuania and Hungary (all +0.8%).

Sweden (-0.1%) was the only Member State that recorded a decrease compared to the previous quarter. The year on year growth rates were positive for nine countries and negative for four.

France got the day off to a good start by reporting growth of 0.2% – which was hailed by its economy minister – before Spain posted a sizzling 0.7% growth. Germany then matched France, with 0.2% growth, while Italy expanded its GDP by 0.3%.

In the UK, mortgage approvals have hit their highest level since the chaos of Liz Truss’s mini-budget.

New Bank of England data show that lenders approved 61,300 in March, up from 60,500 in February, which is the highest total since September 2022.

There was also some relief for borrowers; the ‘effective’ interest rate – which is the actual interest paid – on newly drawn mortgages decreased by 17 basis points, to 4.73% in March.