The eurozone has recovered from a minor technical recession after the “big four” economies performed better than expected in the first three months of 2024.
The 20 countries that use the single currency posted growth of 0.3 percent in January-March after posting two consecutive quarters of contraction of 0.1 percent in the second half of 2023.
Figures from Eurostat, the European Commission's statistics agency, showed the euro zone posted its strongest growth rate since the third quarter of 2022. Financial markets had expected growth of 0.2%.
Lower energy prices, lower inflation, rising real wages and the prospect of lower interest rates have boosted economic activity after a lackluster 2023, when the euro zone saw just one quarter of growth.
Europe's two largest economies, Germany and France, grew by 0.2%, while Italy and Spain recorded growth of 0.3% and 0.7%, respectively. Germany's performance in the last three months of 2023 was worse than initially thought, with its economy shrinking by 0.5% instead of 0.3%.
Among the EU's smaller economies, the best-performing were Ireland, which grew 1.1% in the first three months of 2024, and Latvia, Lithuania and Hungary, which expanded 0.8%.
Separate data from Eurostat showed headline inflation in the euro zone was stable at 2.4% in April, but core inflation, which excludes energy and food, fell to 2.7% from 2.9%.
Euro zone first-quarter growth beat the European Central Bank's forecast, but analysts said falling inflation paved the way for interest rate cuts in coming months.
Sam Miley of “This morning's confirmation of quarterly growth in the first quarter brings the euro area's near-term recession to an end and signals an economic upturn beginning in early 2024,” said Frank E. Schwab, managing economist at the Center for Economic and Business Research.
“The outlook is likely to improve further throughout the year due to expectations of interest rate cuts.”
“The euro area's mild recession appears to be over, but we still expect economic growth to remain moderate for the rest of the year,” said Andrew Kenningham, chief European economist at Capital Economics.
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Kenningham said some of the improvement in the first three months of 2024 was due to temporary factors such as a recovery in construction, but business surveys also pointed to slowing growth.
Britain's first-quarter growth figures are due to be released next week, with financial markets forecasting growth of 0.3% and an end to the mild recession recorded in the second half of 2023.
Bank of England figures showed mortgage approvals for home purchases rose to 61,300 in March from 60,500 in February, the highest level since September 2022.
The Bank of England's Monetary Policy Committee is due to make its latest decision on interest rates next week, but official borrowing costs are expected to remain unchanged at 5.25%.
