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E-mail Xinhua, May 1, 2024
BRUSSELS, May 1 (Xinhua) -- The economic output in the eurozone rose by 0.3 percent in the first quarter on a quarterly basis, the statistical office of the EU said on Tuesday.
The latest data released by the EU point to a stronger-than-expected rebound and an end to the recession.
As the restrictive monetary policy by the European Central Bank (ECB) is working its way through the system, inflation is gradually coming down, paving the way for an economic recovery which is not on a strong footing yet.
STRONG BOUNCEBACK
The eurozone economy in the first quarter was 0.3 percent, which is larger than the fourth quarter last year. On a year-on-year basis, the euro area GDP grew by 0.4 percent, according to a release by European statistics (Eurostat).
The growth in the first quarter marked a turnaround from the previous quarter when the economy shrank by 0.1 percent after a quarterly contraction of 0.1 percent in the third quarter of 2023.
The bounceback was mainly attributed to the strong performance of the top economies in the block.
The growth of Spain continued into the first quarter with an increase of 0.7 percent, the same pace as the fourth quarter last year.
Germany registered a rebound with an increase of 0.2 percent on quarterly basis, reversing the contraction of 0.5 percent in the fourth quarter of 2023. As the largest economy in the eurozone and the EU, Germany was one of the worst performers in terms of economic growth.
France's GDP also ticked up by 0.2 percent, slightly higher than the fourth quarter of 2023.
Italy's economy expanded by 0.3 percent, beating the growth rate of 0.1 percent in the previous quarter.
The rate at which the euro area grew in the first quarter has been the fastest since the third quarter of 2022, according to data released by Eurostat.
STABLE INFLATION
The ECB has been keeping interest rates at historically high levels after lifting them by 450 basis points in a little more than one year in a bid to tame surging prices in the euro area.
The interest rates, as restrictive as they are, keep the borrowing cost high, dampen the demand, and weigh on the economic growth in the euro area.
Inflation and private consumption will likely determine the pace of the recovery in the euro area, a report published by consultancy firm Deloitte in April said.
In a separate release on Tuesday, the Eurostat unveiled that the euro area inflation in April was 2.4 percent, flat with March, according to a flash estimate.
The core inflation, or inflation excluding food and energy, went down to 2.7 percent in April from 2.9 percent in March.
There are signs of recovering domestic demand in the euro area, which may make inflation linger longer, said Bert Colijn, a senior economist at ING Bank, in a note.
As energy prices continue to drop and food price pressure eases, stickier core inflation in which wages and prices set by firms play a critical role, according to the Deloitte report.
FRAGILE RECOVERY
The data released on Tuesday are a sign that the euro area economy has "clearly entered a better phase with economic recovery", noted Colijn.
But he warned that "there is no vigorous rebound in the making" as weak global demand, higher interest rates and the lagging real wage growth are still weighing on the euro area economy.
The surveys conducted by the European Commission (EC) are also depicting a grim picture. In April, the Economic Sentiment Indicator (ESI) which is designed as a barometer of the surveys to gauge the sentiment in the economy, declined marginally in both the EU and the eurozone.
Consumer confidence in April still scored well below the long-term average, said a release by the EC.
A report by International Monetary Fund (IMF) published in April expects growth in the eurozone to pick up this year from "very low levels."
According to the IMF projections, the eurozone economy is forecast to grow by 0.8 percent in 2024 and 1.5 percent in 2025. Enditem
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