The eurozone economy recovered from a small recession in the first quarter, with Germany returning to growth and expansion accelerating elsewhere. At the same time, inflation remained stable, supporting the case for the European Central Bank to lower interest rates.
The 20-country bloc’s GDP climbed by 0.3% quarter-on-quarter in January-March, for a 0.5% year-on-year increase. The fourth-quarter GDP statistic was also revised downward to a negative 0.1% from a previous 0.0%, indicating that the eurozone was in a technical recession in the second part of 2023. GDP fell by 0.1% in the third quarter.
The IMF predicted earlier this month that the bloc’s GDP would increase by 0.8% this year, double the rate of 2023, and by a healthier 1.5% in 2025. According to figures, eurozone inflation was steady at 2.4% in April. Germany, the eurozone’s largest economy, returned to growth in the first quarter with a larger-than-expected 0.2% increase from the previous quarter thanks to exports and building investment, supported by exceptionally warm winter weather.
Spain’s GDP expanded by 0.7% quarter on quarter, exceeding analysts’ expectations of 0.4% growth, owing to an increase in investment and private consumption. Despite the deployment of European recovery funds in prior quarters, investment growth remained modest. Industry and construction grew during the quarter.
The development is good news for the French government, which faced intense opposition criticism for its economic policies after revising its 2024 growth prediction in February.