Official data on Tuesday showed the euro zone economy grew faster than expected in the first quarter of 2024, emerging from recession with inflation under control.
Despite the growth rate, economists say the numbers are unlikely to prevent the European Central Bank (ECB) from cutting interest rates in June as expected.
Growth in the 20-nation single currency area reached 0.3% quarter-on-quarter in the first three months of this year, the EU's official data agency said.
Analysts polled by FactSet and Bloomberg had expected 0.1%.
However, the figures show that the eurozone economy entered a technical recession in the second half of last year after gross domestic product (GDP) fell by 0.1% in the last two quarters of 2023.
Growth was stronger than expected, following welcome news on consumer prices.
Eurostat said the euro zone's annual inflation rate was unchanged in April at 2.4% from the previous month, in line with economists' expectations.
This figure means interest rates remain close to the ECB's 2% target.
ECB officials will also welcome data on core inflation, which excludes volatile energy, food, alcohol and tobacco prices. Core inflation, the ECB's key indicator, slowed to 2.7% in April from 2.9% in March.
Eurozone inflation has fallen sharply from its peak of 10.6% in October 2022, following Russia's attack on Ukraine and the ensuing energy crisis.
The ECB has been aggressively raising interest rates since July 2022 to stem soaring prices, but has frozen borrowing costs in the past few months amid growing calls for interest rate cuts.
London's Andrew Kenningham said: “Today's first-quarter GDP data was better than expected, meaning the euro area is out of recession, but core and services inflation both fell in April. “This does not prevent the ECB from starting an easing cycle in June.” Capital Economics is a consulting firm based in .
– “Optimism” returns –
There was more good news in Tuesday's euro zone statistics, after Germany and France, the euro zone's two biggest economies, recorded growth of 0.2% in the first quarter.
ING Bank analyst Carsten Brzeski said “optimism has returned to the German economy” after the country avoided recession.
Southern Europe appears to be doing even better. Spain's economy grew by a stronger-than-expected 0.7% in the first quarter of 2024, driven by increased exports and business investment. Italy recorded growth of 0.3% over the same period.
International Monetary Fund chief Kristalina Georgieva, who was in Brussels for meetings with EU officials, said she was “optimistic” about Europe's growth.
“It's actually growing. Despite the energy shock, the economy is in positive territory,” she told reporters.
But Georgieva warned that “inflation is coming down, but it's not over.”
Energy prices in the euro area fell in April, contracting sharply by 0.6% compared to a 1.8% decline in March.
Among the 27-nation European Union, Lithuania had the lowest inflation rate of 0.4% in April, according to Eurostat data. Finland was not far behind, with an inflation rate of 0.6% in April.
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