It has become clear that the eurozone's growth rate has exceeded expectations set at the beginning of this year, allowing it to emerge from recession. Gross domestic product (GDP) across the single currency area expanded by 0.3% in the January-March period, statistics agency Eurostat said on Tuesday.
This means the eurozone's shallow technical recession is over, after GDP contracted by 0.1% in the third and fourth quarters of last year.
It was also the euro zone's highest quarterly growth rate since the third quarter of 2022, supported by better-than-expected growth in Germany, France, Italy and Spain.
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German production increased by 0.2% in the first quarter of this year compared with the previous three months, while economic growth in France accelerated by 0.2%, faster than expected. This was higher than the 0.1% growth recorded from October to December.
Italy's GDP increased by 0.3%, Spain's GDP increased by 0.7%, Portugal's GDP increased by 0.7%, and Austria's GDP also expanded by 0.2%, exceeding expectations. The broader European Union (EU) also grew by 0.3%.
“The highest quarter-on-quarter growth was recorded in Ireland (+1.1%), followed by Latvia, Lithuania and Hungary (all +0.8%),” Eurostat said.
“Sweden (-0.1%) was the only member country that recorded a decrease compared to the previous quarter. Year-on-year growth was positive in nine countries and negative in four.”
Sam Miley, managing economist and head of forecasting at Cebr, said: “The outlook is likely to improve further over the course of the year due to expectations for rate cuts.”
The news comes as eurozone-wide consumer price inflation remained at 2.4% in the year to April, in line with March's reading.
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Inflation in services slowed from 4% to 3.7%, while inflation in food, alcohol and tobacco rose from 2.6% to 2.8%. Non-energy industrial product prices rose 0.9%, down from a 1.1% rise.
The economy is supported by falling energy prices, which followed a spike in oil and gas prices after Russia's 2022 invasion of Ukraine.
Neil Birrell, chief investment officer at Premier Mitten Investors, said: “Eurozone inflation has come in as expected but is proving more robust than expected, reflecting the experience of other regions. ” he said.
“Nevertheless, the economy is doing well, which means that, overall, the ECB can remain on track to be the first major central bank to press the 'cut' button on interest rates, possibly in June. It’s probably not.”
“The outlook for the eurozone is improving as doubts creep in over the outlook for other countries.”
See: Why interest rates matter for bonds, stocks, and cash
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