The Eurozone GDP grew by 0.1% in the first three months of the year. Barely gathering traction after avoiding a winter recession. As headwinds from inflation continue to erode people’s appetite to spend.
Friday’s report comes on the heels of poor growth forecasts from the United States a day earlier. Which fueled fears of a global recession in the world’s largest economy.
After seeing zero growth in the final three months of 2022, the 20 countries that utilise the euro currency increased their pace in the first quarter. The eurozone averted a winter recession because to mild weather that reduced demand for natural gas. After Russia cut off most supply to the continent due to its war with Ukraine. European governments and utilities scrambled to find alternative sources to heat homes, generate electricity, and power factories.
Industrial activity has increased, and China’s removal of COVID-19 limitations has improved the world economy’s outlook. The mild weather also allowed building to begin earlier.
However, inflation is stifling consumer spending. With wage increases only partially offsetting how much more people have to pay for groceries, clothing, and other necessities. Interest rate hikes by the European Central Bank to contain inflation will also affect on growth by making financing more expensive for consumption or corporate investment.
Annual inflation in the eurozone GDP dipped to 6.9% in March from 8.5% the previous month. But remains significantly above the ECB’s 2% target for the economy. The bank is expected to raise interest rates again at its policy meeting on Thursday.
And, following the failure of Silicon Valley Bank in the United States and the forced takeover of Credit Suisse by rival Swiss bank UBS, credit may become even tighter. The upheaval may raise market and regulatory scrutiny of bank finances. Making them less willing to risk lending. This could assist to reduce inflation while slowing economic growth.
