European economic growth came out at a slender 0.1% over the first three months of 2023, with the eurozone narrowly managing to avoid a potential recession during the winter months.
While both European and U.S. economic growth for the first quarter was disappointing, Europe’s growth in Q1 signals a positive turnaround following zero growth in the final quarter of 2022.
Lower gas demand following milder-than-expected winter weather helped to alleviate economic pressure on eurozone countries while maintaining European gas inventory levels.
Consumer spending across the continent remains suppressed, however, as rising prices continue to offset wage increases. Continued interest rate increases by the European Central Bank have also made it more costly to afford housing and business investments.
Average inflation in the eurozone at the end of March was down to 6.9% from 8.5% in February. This rate is still significantly higher than the ECB’s target of 2%, making an interest rate hike at its next policy meeting all the more likely.