The eurozone economy experienced significant growth in the first quarter of 2024 following a period of stagnation since the energy crisis in late 2022. This growth is attributed to a more stable energy supply, lower costs, and decreased inflation. Wage growth has also accelerated, benefiting consumers by regaining purchasing power.
Initial reports suggest that household consumption in France led the growth, while Spain saw an increase in investment leading to improved economic activity. Southern European countries such as Spain and Portugal outperformed their northern counterparts, with growth rates of 0.7% and 0.3% respectively. Germany and France both showed modest growth at 0.2% quarter-on-quarter, indicating an overall improvement in the region.
While the eurozone is showing signs of economic recovery, it is important not to exaggerate the progress. Global demand remains weak, real wages have not fully recovered, and higher interest rates are still being adjusted to. The European Commission’s Economic Sentiment Indicator for April displayed mixed results, with moderate service sector activity and declining manufacturing output.
Despite some challenges, the eurozone’s continued modest recovery is positioning it for better-than-expected growth in 2024. With low inflation rates and record low unemployment, the economic landscape in the eurozone is looking positive.