The eurozone achieved significant economic growth in the first quarter of 2024, the fastest pace in two years, and allayed fears of looming 'stagflation' in the region.
Output in the single currency bloc rose by 0.3% in the first three months of the year, a significant improvement from the stagnant growth recorded in the previous quarter. The growth rate was the highest since the 2022 Ukraine crisis and exceeded economists' expectations, who had expected modest growth of 0.1%.
Data from the European Union's statistics agency Eurostat showed annual consumer price inflation was stable at 2.4% in April, in line with March figures and in line with forecasts. This stabilization of inflation, the lowest level since July 2021, provides further reassurance amid economic volatility.
Melanie de Bono, senior European economist at Pantheon Macroeconomics, said the resilience was surprisingly strong, suggesting that the economy is emerging from the shallow recession experienced at the end of last year.
The positive momentum in the first quarter suggests an upturn in the eurozone, especially after disruptions in major economies such as Germany due to energy and industrial challenges associated with Russia's invasion of Ukraine, and a spike in inflation of more than 10%. There is. The developments come ahead of the European Union's next general election in June, which will be the first vote after Britain leaves the country.
Among the standout performers, the Republic of Ireland grew by an impressive 1.1%, emerging as the region's fastest growing economy. However, factors such as measurement differences and volatility caused by foreign direct investment from large American technology companies headquartered in Ireland contribute to Ireland's unique economic situation. Other notable countries include Lithuania, Latvia, Spain, and Portugal, each with strong growth rates.
Core inflation, which excludes volatile food and energy prices, fell slightly to 2.7% from 2.9%, while services inflation slowed to 3.7% from 4% a year earlier in April.
The encouraging economic data will give European Central Bank (ECB) policymakers some breathing room as they consider adjusting interest rates after the region is hit by a recession due to rising borrowing costs. The ECB's next decision is scheduled for June 6, with financial markets expecting a 60% chance of monetary easing for the first time since 2020. But a growing economy and record-low unemployment could create new inflation problems.
Amid the global economic situation, manufacturing activity in China is also improving, with April recording the fastest expansion in 14 months due to an increase in new export orders. This shows that China's recovery is progressing, but challenges persist in domestic demand and the real estate sector.
Despite China's strong first-quarter GDP growth of 5.3%, beating analysts' expectations, March indicators suggest continued weakness in industrial profits, retail sales and real estate transactions. This could hinder the country's ambitious growth target of around 5% in 2024.
