Euro Area: The economy continues to expand, albeit mildly, in Q1
The economy grew 0.2% in seasonally-adjusted quarter-on-quarter terms in Q1, marginally below Q4 2021’s 0.3% expansion. Compared with Q1 2021, seasonally-adjusted annual GDP increased 5.0% in Q1 2022, following the 4.7% rise recorded in the previous quarter.
The quarterly deceleration came amid soaring inflation and considerable supply disruptions due to renewed Covid-19 lockdowns in China and the war in Ukraine. In terms of individual countries, Spain’s economy expanded 0.3% over the previous quarter in Q1 and Germany’s GDP increased 0.2%. Meanwhile, France’s economy stagnated, while output in Italy fell 0.2%.
Commenting on the short-term outlook, Bert Colijn, senior Eurozone economist at ING, stated:
“The outlook for Q2 is pretty tough to read at the moment. Early data from the PMIs signal a positive start to the quarter. At the same time, we see soaring prices, weak consumer confidence and tightening financing conditions, which means that we can expect significant pain ahead. It looks like some reopening of the economy still boosted service sector activity in April, but the question is how long this effect can last. We expect the economy to shrink in Q2. Still, employment demand remains strong and businesses continue to expect significant price increases in the months ahead.”