Austria Fixed Investment (ann. var. %)

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GDP records sharpest contraction since Q4 2021 in Q1

GDP contracted 0.3% on a seasonally adjusted quarter-on-quarter basis in the first quarter, below the flat reading logged in the fourth quarter of last year. Q1’s reading marked the worst since Q4 2021.

Household spending rebounded, growing 0.7% seasonally adjusted quarter-on-quarter in Q1 compared to a 1.2% contraction in Q4. Government consumption dropped 0.6% (Q4 2022: +2.4% s.a. qoq). Meanwhile, fixed investment growth accelerated to 1.1% in Q1, above the 0.7% increase recorded in the prior quarter.

On the external front, exports of goods and services contracted 1.8% in Q1, marking the worst result since Q1 2021 (Q4 2022: -0.7% s.a. qoq). In addition, imports of goods and services deteriorated, contracting 0.1% in Q1 (Q4 2022: +0.5% s.a. qoq).

On an annual basis, economic growth lost steam, cooling to 1.8% in Q1, from the previous period’s 3.0% increase. Q1’s reading marked the slowest growth since Q1 2021.

On the economic outlook, analysts at Erste Bank commented:

“We expect this sluggish development to continue in 2Q. Persistently high inflation, especially for household energy, restaurants and services, is likely to reduce household purchasing power in 1H23 and dampen private consumption. From summer onwards, we expect inflationary pressures to ease, which should have a positive impact on private consumption. Against this backdrop, foreign trade, government support measures and a significant reduction in inflationary pressure should favor economic growth from 2H23.”