Eurozone economy resumed growth thanks to trade and spending

EXPORTERS and consumers drove the euro-area economy’s return to growth at the start of the year, offsetting a drop in investment.

Gross domestic product rose 0.3 per cent in the first quarter – in line with an initial estimate that exceeded the expectations of most analysts. The advance brought to an end the contraction the bloc endured in the final quarter of 2023. Data revisions for the third quarter mean the region didn’t experience a recession after all.

Net trade provided the biggest contribution to growth in the three-month period, adding 0.9 percentage point to the overall outcome. Consumer spending brought another 0.1 percentage point, helping to outweigh drops of 0.3 percentage point for investment and inventory respectively.

The report adds to evidence that the 20-nation currency union is slowly finding its feet after a once-in-a-generation inflation shock. Confidence in a sustained recovery is building as consumer-price gains moderate towards 2 per cent and after the European Central Bank lowered interest rates this week following its flurry of hikes.

Growth is set to remain subdued at least in the near term as geopolitical tensions swirl and manufacturers’ struggles continue: Economists predict a full-year pace of just 0.7 per cent.

Countries also saw sharp variations in growth drivers.

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Initial data suggested investment and tourism fuelled Spain’s spurt, while capital spending and private consumption buoyed France. Spanish hotel group Melia has raised core profit guidance for 2024 on expectations of robust travel demand. First-quarter sales at French cosmetics group L’Oréal and yogurt maker Danone beat estimates.

In Germany, Europe’s top economy, shoppers stayed home and construction bolstered growth during an unusually mild winter. This quarter may also produce a small increase in output, according to the Bundesbank.

Steelmaker Salzgitter has warned profits this year may fall short of expectations. BLOOMBERG