The Eurozone economy is finally breaking out of stagnation and entering recovery Photographs

The Eurozone economy showed some meaningful growth again in the first quarter of 2024 after a long period of stagnation since the onset of the energy crisis in the second half of 2022. The economy benefits from a more stable energy supply, with costs significantly reduced. As a result of low inflation. Wage growth has accelerated to compensate for lost purchasing power, which is currently benefiting consumers.

We don't have the details yet, but judging by what's happening in France, household consumption is leading the way. In Spain, strong investment data lifted economic activity. Overall, Southern Europe appears to have once again outperformed the North, with Spain and Portugal recording growth of 0.7% in the quarter, while Italy increased by 0.3%. Germany and France both grew by 0.2% in the quarter, which isn't huge, but it's an improvement nonetheless.

However, we should not exaggerate the 'starting the economic recovery' story. Unlike after the pandemic, real wages have not recovered to 2021 levels as the economy is still suffering from weak global demand, and it is still adjusting to higher interest rates.

The European Commission's economic sentiment indicator indicated a disappointing April again, with moderate service sector activity and weakening manufacturing output. The PMI for April was good, but overall measures suggest the economy is a mixed bag at the start of the second quarter.

After today's encouraging GDP data for 1Q, a continued modest recovery puts the eurozone on track for better-than-expected growth rates in 2024. With inflation currently relatively benign and unemployment at very low levels, the economic environment in the Eurozone is looking up.

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