Why it matters: The eurozone economy has regained its footing – for now.
Just a few months ago, governments across Europe braced for the possibility of a full-blown recession, as Europe turned away from Russian natural gas and food and energy bills skyrocketed. But the countries quickly reserve energy reserveand a mild winter, coupled with mass conservation efforts, have helped Europe avoid the worst.
The data shows that the eurozone economy is regaining its footing – albeit only slowly. In the first three months of the year, investment and foreign trade expanded in major economies such as France and Germany. But both countries have yet to recover as quickly as needed to be the growth engines for the region.
And inflation, at an annual rate of 6.9%, remains a big deal. European governments have stepped in to support businesses and consumers with subsidies to help them get through expensive food and electricity bills, adding to their overall debt burden. .
The European Central Bank is expected to raise interest rates again next month, increasing the cost of doing business. The International Monetary Fund said in a report announced earlier this month that Europe’s biggest challenge will be to tame inflation while avoiding a recession.
“We do not expect growth to pick up meaningfully through 2023. “Strong start to 2023 for the industry,” said Rory Fennessy, European economist at Oxford Economics. The industry is likely to be short-lived, while rising inflation and tightening financial conditions will hold back growth this year.”
By country: Germany and France are behind Italy and Spain.
Germany, one of Europe’s largest economies hardest hit by the impact of Russia’s war, was flat after shrinking 0.5 percent in the final quarter of last year. On an annualized basis, growth in the first quarter from a year ago fell 0.1% in the eurozone’s largest economy.
In France, which has been hit by strikes and nationwide protests against President Macron’s move to raise the minimum retirement age, the economy grew 0.2 per cent amid rising foreign trade and New activity at factories, including glass manufacturers and other industrial zones, has slowed. production or temporarily closed during the winter because of rising energy costs.
Growth picked up in Italy, Belgium and Spain, and outpaced Portugal further, where the economy expanded 1.6% in the first three months of the year.
What’s next: Central banks set interest rates after reading economic signals.
New data on price pressures in the euro area will arrive on Tuesday, when the initial data on inflation data for April is released. The annual inflation rate has been slide lower in recent months, helped by reducing energy costs, but food prices went in the opposite direction, reaching a rate of 15.4 percent in March. And the so-called core inflation rate, a sign of underlying inflationary pressures, edged higher last month.
That inflation data, along with the latest figures on economic growth, will be closely examined by European Central Bank policymakers, who will meet to set interest rates on Wednesday. Year. At its last meeting, in March, Central bank raises interest rates by half a pointcontinue the campaign to control inflation. Another rate hike is widely expected.
