Eurozone economic system grows 0.1% within the first quarter

The skyscrapers of the city center can be seen from the Lohrberg in the north of Frankfurt. Photo: Arne Dedert/dpa (Photo by Arne Dedert/picture alliance via Getty Images)

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The euro-zone economy grew a marginal 0.1% in the first quarter of the year, preliminary figures showed on Friday, although German GDP stagnated over the period.

The print was below analysts’ expectations, with a Reuters poll of economists earlier forecasting quarterly growth of 0.2%. The economy grew 1.3% on an annualized basis, just missing a forecast of 1.4%.

Earlier this month, statistics agency Eurostat revised its estimate of gross domestic product for the fourth quarter of 2022 for the euro zone down to zero from quarterly growth of 0.1% after posting growth of 0.4% in the third quarter.

The slight growth signal for the first quarter comes as economic output is struggling with persistently high inflation. Energy prices were a key driver last year as European consumers increasingly lost access to Russian supplies following Moscow’s full-scale invasion of Ukraine. Carsten Brzeski, global head of macro at Dutch bank ING, said falling wholesale energy prices, warmer-than-expected weather and fiscal stimulus had helped the bloc dodge a widely feared winter recession.

However, noting significant differences between countries, he said future growth will be hampered by an ongoing race between positive industrial momentum and wage growth, on the one hand, and the European Central Bank’s monetary tightening and risks of a US recession, on the other.


Europe’s leading economies diverged in their performance in the first quarter, national figures showed on Friday. The German economy stagnated from January to March compared to the previous three-month period. It rose by 0.2% on an annualized basis and by 0.1% on an unadjusted basis due to an extra working day in the previous year, according to Germany’s statistics agency Destatis.

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 slowed by high inflation, interest rate hikes and an expected US recession in the second half become.

France’s GDP rose 0.2% in the first quarter, Insee statistics showed, despite a series of widespread strikes that sparked activity in protest at President Emmanuel Macron’s proposed pension reform.

Ireland’s GDP was a notable weak spot, falling 2.7% qoq, while Portugal’s economy grew 1.6%.

Political Participation

GDP figures will be closely watched ahead of the ECB’s May 4 meeting, which aims to target headline inflation at 6.9% and core inflation at a record high of 5.7%.

Some ECB policymakers have stressed that they believe they need to make further rate hikes as they consider a 25 basis point or even 50 basis point hike next week. The collapse of several lenders in the US and Europe in March and the ensuing turmoil in the banking sector had raised questions as to whether central banks would be forced to slow or reverse their rate hikes.

Most recently, in March, the ECB raised its three key interest rates by 50 basis points to 3%.

Nervousness on the European front has largely calmed and officials have underscored the strength of the sector, although the shadow of cash flight and further volatility lingers.

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