The eurozone on its way out of recession, analysts predict

Growth in the 20 countries that use the euro averaged 0.3 per cent in the first quarter of 2024, while the price increase in April was 2.4 per cent, unchanged from the previous month.

These two figures are better than many analysts expected, and several are now talking about the zone being over the top. Both Bloomberg and FactSet had expected economic growth of a modest 0.1 percent.

At the same time, the figures show that the eurozone was in a mild recession in the fourth quarter of 2023 as a result of the economy in the zone as a whole having shrunk by 0.1 per cent in the last two quarters.

– Hardly an interest rate cut anytime soon

Chief economist Kyrre M-Knudsen at Sparebank1 SR-Bank says that overall inflation was as expected, and that core inflation was slightly higher.

– Unfortunately, there was even worse news from Europe on Tuesday. The GDP figures are much better than expected, says Knudsen. This improvement makes interest rate cuts less likely, as the economy improves without the need for interest rate cuts to contribute to further stimulus.

Knudsen believes that the announced interest rate cut in the EU in June will be postponed, and that there is unlikely to be an interest rate cut in Norway before it eventually happens in the EU.

– Europe has been through a long period of subdued growth, but now we see positive rates in the European economy, says Knudsen.

Plus for Germany and France

Germany experienced economic growth of 0.2 percent in the first quarter. The same result is reported from France.

Several analysts now believe that Germany is over the worst of it.

In its latest assessment of the development of the economy in the coming months, the German government says that there are signs that the economy is turning around. But no strong progress is expected yet.

In the last quarter of 2023, the German gross domestic product had fallen by 0.5 per cent compared to the same period the previous year. The year 2023 taken as a whole showed a slight recession of 0.2 per cent.

Economic growth in France in the first quarter of 2024 doubled from the last quarter of last year. Growth ended at 0.2 per cent, compared to 0.1 per cent in the fourth quarter.

The French statistical agency INSEE says that there has been increasing domestic demand, particularly in the areas of food and energy. Household consumption increased from 0.2 per cent in the fourth quarter to 0.4 per cent in the first quarter of this year.