FX.co ★ Eurozone Exits Recession In Q1

The economic landscape of the Euro area showed considerable improvement in the first quarter following two successive quarter declines. All four leading economies showcased impressive performance, raising hopes for continued recovery throughout the year.

Data from preliminary flash estimates by Eurostat revealed a Gross Domestic Product (GDP) growth of 0.3 percent sequentially, surpassing the anticipated 0.1 percent. This surge followed a 0.1 percent drop in each of the third and fourth quarters of 2023.

This progress implies that the economy using the single-currency recovered from a technical recession, traditionally referred to as two successive quarters of negative growth. Yearly, the GDP growth quickened to 0.4 percent from the preceding quarter's 0.1 percent, marking a better performance than the 0.2 percent prediction.

Performing better than expected, the German economy saw a 0.2 percent sequential growth, a sharp contrast to the 0.5 percent drop reported previously. Thanks to a strong domestic demand, the French economy experienced an economic growth of 0.2 percent, doubling from 0.1 percent in the previous quarter. Meanwhile, Italy's GDP growth also accelerated to 0.3 percent, marking the third consecutive quarter of expansion.

Spain led the way with an impressive 0.7 percent growth rate, which lined up quite similarly to the growth rate from the previous quarter. Initial data also indicated that economies of other Euro area countries including Ireland, Portugal, Belgium, and Austria experienced growth in the first quarter of the year.

Economist Bert Colijn of ING is of the view that this modest recovery could put the currency bloc on a trajectory for superior growth rates in 2024 than initially expected. He added that with inflation remaining relatively stable and unemployment figures at an all-time low, the economic future of the Eurozone seems promising.

Separate data from Eurostat revealed that harmonized inflation in the Eurozone remained steady at 2.4 percent in April, aligning with experts' anticipations. However, core inflation, excluding prices of energy, food, alcohol, and tobacco, eased to 2.7 percent from 2.9 percent, slightly above the anticipated 2.6 percent.

On a monthly basis, the harmonized index of consumer prices and core consumer prices surged by 0.6 percent and 0.7 percent respectively in April.

Given the current scenario, the European Central Bank is largely expected to slash interest rates in the forthcoming policy session in June, as inflation is anticipated to begin gravitating back to the 2 percent target in the upcoming months.