Eurostat declared on Tuesday that there was a recovery from recession in the euro zone during the first quarter of 2024, with gross domestic product (GDP) experiencing a growth of 0.3 per cent. This is outperformance than originally expected from their largest economies which include Germany, France, Italy and Spain.
However, this positive growth is somewhat clouded by the April inflation indices for the group indicating a 2.4 per cent annual rise in consumer prices, unchanged from March and slightly exceeding analyst forecasts. Eurostat anticipated that the yearly rate of inflation within the services sector would peak in April at 3.7 per cent, down from 4 per cent. Meanwhile, energy price inflation fell to -0.6 per cent, contrasting the previous -1.8 per cent.
European Central Bank (ECB) policymakers have demonstrated worry regarding the high price growth levels in the services sector, which are attributed to increased wage requests as workers attempt to catch up on living costs. Despite the higher-than-anticipated inflation figures, this is unlikely to hinder the predicted ECB decrease of interest rates in June.
In May, ECB policymakers maintained rates as expected, but their official policy declaration for the first time in the current cycle specifically mentioned the potential need for rate reductions. This has cemented their intention to cut rates in the upcoming meeting.
During the second half of 2023, output faced a contraction due to high inflation, escalated interest rates, and weak global demand. However, the latest GDP figures indicate an onset of a slow recovery. The boost in GDP was spearheaded by the German economy, which saw a 0.2 per cent increase from quarter to quarter due to enhanced construction output and positive net exports.
Economist Martin Ademmer has stated that the mild boost in GDP at the start of the year might be an indication of a steady recovery over the subsequent quarters. Nevertheless, he also commented that due to both cyclical and structural factors, the German economy is unlikely to be tremendously dynamic in the near future.
The Central Statistics Office, in figures released on Monday, indicated that the Irish economy also bounced back into growth in the first quarter of 2024. This is thanks to increased activity in the State’s multinational-dominated technology sector, which is expecting extra momentum from the probable introduction of monetary easing by the European Central Bank from the beginning of June.
The Irish economy suffered a technical recession due to notable decline in exports over five consecutive quarters as reported by the Central Statistics Office (CSO). Nonetheless, in a recent preliminary report by the CSO, there’s an indication of improvement. The gross domestic product (GDP) observed an increment of 1.1 per cent in the first quarter, spanning January to March, contrasted with the previous quarter.