The eurozone economy is experiencing meaningful growth in the first quarter of 2024 after a period of stagnation since the energy crisis in 2022. This growth is due to a more stable energy supply, resulting in lower inflation and accelerated wage growth that benefits consumers.
Household consumption in France has boosted economic activity in southern Europe, outperforming the north with Spain and Portugal registering 0.7% growth. Italy saw an 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. Following the encouraging GDP data in the first quarter, the eurozone is on track for better-than-expected growth in 2024.