Euro Area Private Consumption (ann. var. %)

Private Consumption in Euro Area

The economy grows timidly in Q1

The economy grew 0.1% in seasonally adjusted quarter-on-quarter terms in Q1, following Q4 2022’s flat reading and matching market expectations. Compared with Q1 2022, seasonally adjusted annual GDP increased 1.3% in Q1 2023, following the 1.8% year-on-year rise recorded Q4 2022.

The quarterly expansion came on the back improving business and consumer sentiment, declining—albeit still-high—inflation, easing supply chain pressures and lower energy prices. That said, a worsening global economic outlook and higher interest rates put a lid on growth. In terms of individual countries, Italy and Spain’s economies grew 0.5% over the previous quarter in Q1, France’s economy expanded 0.2%, and Germany’s GDP remained unchanged from the previous quarter. The Mediterranean members of the currency union likely benefited from robust recoveries in the tourism sector thanks to a strong Easter season.

Commenting on the outlook, Bert Colijn, senior Eurozone economist at ING, stated:

“Looking ahead, a short-lived industrial renaissance and the gradual impact of recent wage increases could actually lead to a further acceleration of eurozone growth—at least in the short run. In fact, it will again be a race between two opposing drivers: the positive momentum in industry and wage increases against the impact of monetary policy tightening and a looming US recession.”