Euro Area: Economy returns to growth in Q1
The economy expanded 0.3% in seasonally adjusted quarter-on-quarter terms in Q1 2024. This followed Q4 2023’s 0.1% dip and beat market expectations of a 0.2% increase. Compared with Q1 2023, seasonally adjusted GDP increased by 0.4% year on year in Q1, following 0.1% growth in the previous quarter.
The quarterly increase reflected broad-based expansions in the Eurozone’s largest economies. Germany’s GDP rose 0.2% over the previous quarter in Q1, as did the French economy. Moreover, Italy’s economy expanded 0.3%, while Spanish GDP grew 0.7%.
This year, GDP is likely to expand at a soft pace. The industrial sector should rebound thanks to improved external demand. The disbursement of EU funds should support activity, however. Higher-than-expected debt-servicing costs for highly indebted Mediterranean governments due to increased financial and geopolitical instability pose a downside risk to the outlook.
Commenting on the outlook, Bert Colijn, senior Eurozone economist at ING, stated:
“After today’s encouraging GDP data for 1Q, the continued modest recovery is putting the eurozone on track for a better-than-expected growth rate for 2024. With inflation remaining relatively benign at the moment and unemployment at record lows, the economic environment in the eurozone is looking up.”