The skyscrapers in the city center may be seen from the Lohrberg in the north of Frankfurt. Photo: Arne Dedert/dpa (Photo: Arne Dedert/Alliance photo via Getty Images)
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The eurozone economy grew by a marginal 0.1% in the first quarter of the yr, in line with preliminary data on Friday, although Germany’s GDP declined over the period.
The printout fell wanting analysts’ expectations, with a Reuters poll of economists previously predicting a quarterly increase of 0.2%. The economy grew by 1.3% on an annual basis, only missing the forecast of 1.4%.
Earlier this month, the statistical agency Eurostat revised down its estimates of euro area gross domestic product in the fourth quarter of 2022 from 0.1% quarterly growth to zero, following a rise of 0.4% in the third quarter.
The slight growth signal in the first quarter comes as economic performance struggles with persistently high inflation. Energy prices have been a key factor over the past yr as European consumers have step by step lost access to Russian supplies in the wake of Moscow’s full-scale invasion of Ukraine. Carsten Brzeski, global macro head at Dutch bank ING, said a fall in wholesale energy prices, warmer-than-expected weather and financial stimulus helped the bloc avoid a widely feared winter recession.
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Nevertheless, he noted significant disparities between countries and said future growth can be affected by the ongoing race between positive industrial growth and wage growth on the one hand, and the monetary tightening of the European Central Bank and the risk of a recession in the US on the other.
Discrepancy
Europe’s leading economies mixed in their performance in the first quarter, national data showed on Friday. German economy stagnation in January-March in comparison with the previous three-month period. It rose by 0.2% yoy and 0.1% lower unadjusted as a result of one extra working day in the previous yr, the German statistics agency Destatis reported.
Deutsche Bank economists said Germany narrowly avoided a technical recession and reiterated its call for 0% GDP growth this yr, with the economy held back by high inflation, rate of interest hikes and an expected US recession in the second half of the yr.
Meanwhile, France’s GDP grew by 0.2% in the first quarter. Insee stats revealeddespite a wave of widespread strikes that slowed business, sparked by a protest against President Emmanuel Macron’s planned pension reforms.
Irish GDP was a big weakness, down 2.7% from the previous quarter, while the Portuguese economy grew by 1.6%.
Political stakes
The GDP figures can be watched closely ahead of the May 4 ECB meeting that’s as a result of happen headline inflation at 6.9%, and core inflation at a record high of 5.7%.
Some ECB policymakers have stressed that they imagine rate hikes must proceed as they consider a 25 and even 50 basis point hike next week. The March collapse of several US and European lenders and the ensuing turmoil in the banking sector has raised questions on whether central banks can be forced to decelerate or roll back rate of interest hikes.
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The ECB most recently raised its three key rates of interest by 50 basis points in March, bringing the key rate all the way down to 3%.
The nerves on the European front have largely subsided, with officials highlighting the strength of the sector, although the shadow of deposit flight and further volatility stays.