The eurozone economy has shown meaningful growth in the first quarter of 2024, following a period of stagnation since the energy crisis in 2022. The economy is benefiting from a more stable energy supply, resulting in lower inflation and accelerated wage growth to benefit consumers.
Household consumption in France and stronger investment data in Spain have boosted economic activity in southern Europe, outperforming the north with Spain and Portugal registering 0.7% growth. Italy saw acceleration to 0.3%, while Germany and France both grew at 0.2% quarter-on-quarter.
Despite signs of improvement, the European Commission’s Economic Sentiment Indicator shows moderate service sector activity and weak manufacturing output in April. The economy is still adjusting to higher interest rates and suffering from weak global demand. Real wages have not fully recovered, indicating a modest recovery rather than a vigorous rebound.
However, with inflation remaining low and unemployment at record lows, the economic environment in the eurozone looks positive for continued recovery. Better-than-expected growth is on track for the eurozone in 2024, as indicated by encouraging GDP data in the first quarter.