The euro area economy grew by 0.3% in the first quarter of 2024, beating expectations and recording the highest growth since the third quarter of 2022. Annual inflation remained stable at 2.4%, while core inflation slowed to 2.7%, likely paving the way for the ECB's first interest rate cut. In June.
advertisementEconomic growth in the euro zone in the first quarter of this year exceeded economists' expectations, with annual inflation showing a stable performance in April compared to the previous month. This halted the downward trend that began in January, but also provided some encouraging signs ahead of an expected European Central Bank (ECB) rate cut in June.
Eurostat's preliminary estimates released on Tuesday show that the euro area's gross domestic product (GDP) grew at an annual rate of 0.3% in the first quarter of 2024 compared to the last quarter of 2023. This represents a significant improvement and exceeds the previously reported 0.1% decline. Economists had expected 0.1%. This is also the strongest pace of growth since the third quarter of 2022.
At the same time, the Harmonized Index of Consumer Prices (HICP) remained unchanged at 2.4% year-on-year, in line with expectations, according to provisional data from the European Union Statistics Office. The annual core inflation rate, which excludes energy and food, fell slightly to 2.7% in April from 2.9% in March, slightly more than expected for a 2.6% decline. Despite this, annual core inflation across the euro area has declined for nine consecutive months.
Ireland leads, major economies grow faster than expected
In the European Union, growth in the first quarter of 2024 was 0.3% quarter-on-quarter, accelerating from the previous flat rate.
Among the member countries, Ireland had the highest growth rate of +1.1% QoQ, followed by Latvia, Lithuania and Hungary with +0.8%. Sweden was the only member state to record a decline, with a quarter-on-quarter change of -0.1%.
According to preliminary figures from the Federal Statistical Office, Germany's economic growth rate in the first quarter of 2024 was 0.2%, exceeding market expectations of 0.1% growth. This growth follows a 0.5% contraction in the previous quarter.
Italy's economy expanded by just 0.1% in the first quarter, accelerating from a downwardly revised 0.1% growth in the final quarter of 2023, the National Institute of Statistics revealed. This exceeded market expectations.
According to provisional data from the French National Institute of Statistics and Economic Research (INSEE), the French economy grew by 0.2% quarter-on-quarter in the first quarter of 2024, exceeding market expectations and the growth rate of 0.1% in the previous quarter. .
April's inflation rate suggests the ECB may cut interest rates in June
Annual inflation across the euro area was 2.4% in April, unchanged from March. On a monthly basis, inflation continued at a pace of 0.6%, slowing from March's 0.8% growth.
Core inflation slowed to 2.7% from 2.9% a year ago. On a monthly basis, core inflation rose at a pace of 0.6%, also sharply slowing from the 1.1% recorded in March.
Looking at the main components of euro area inflation, services are expected to record the highest annual rate in April (3.7%, down from 4.0% in March), followed by food, alcohol and tobacco (2.8%). , up from 2.6%). March), non-energy industrial products (0.9%, down from 1.1% in March), and energy (-0.6%, up from -1.8% in March).
As of April, the member states with the highest annual inflation rates were Croatia at 4.7% and Belgium at 4.9%. The latter jumped from 3.8% in March to its highest level in almost a year.
Germany's HICP inflation rate in April was 2.4% annually, slightly higher than the previous estimate of 2.3%.
France's annual HICP inflation rate was stable at 2.4%, unchanged from March, but above expectations of 2.2%.
In Italy, the annual HICP inflation rate fell from 1.2% to 1% in April, making it the third lowest rate after Finland (0.6%) and Lithuania (0.4%).
At its last Governing Council meeting, ECB policymakers said that if data showed growing confidence that inflation was steadily converging towards the target, they would not be able to “reduce the current level of monetary policy restrictions.” It would be appropriate to lower it.”
Overall, April's inflation data could clear the final hurdle and set the stage for the ECB's first interest rate cut in June.
However, if monthly measures of both headline and core inflation continue at these levels beyond May, we may need to continue to exercise caution. If these levels hold, they could impede or stop the ECB's rate cutting cycle.
