Eurozone exits recession as Q1 GDP grows 0.3%, inflation holds at 2.4%

GDP across the eurozone expanded by 0.3% in January-March, according to data released by statistics body Eurostat, ending the technical recession of last year when the economy shrank by 0.1% in both the third and fourth quarters of last year.

Stronger-than-expected growth in Germany, France, Italy and Spain in particular was the main driver, assisted by lower energy prices.

However, core inflation - which strips out volatile items such as food and energy - fell by less than expected to 2.7% in April, down from 2.9%, but ahead of forecasts of a larger fall to 2.6%.

"The economy is profiting from a more stable energy supply, with costs having substantially eased, resulting in lower inflation. Wage growth, in turn, has accelerated to make up for lost purchasing power, which is currently benefiting consumers," said ING senior eurozone economist Bert Colijn.

Analysts at Oxford Economics said the data pointed to "a turning point after the mild recession in H2 2023" but they were still cautious as first-quarter momentum "may yet overstate the strength of the gradual recovery this year and we expect some moderation of the growth pace in Q2".

"Spain's strong 0.7% q/q expansion in Q1 follows an upward revision to the Q4 figure and confirms that the Spanish economy remains by far the most dynamic among the major eurozone economies," they added.

"Contrary to the previous quarter, where a big adjustment in inventories drove a large part of the expansion, the Q1 figure showed a balanced composition, with household spending, fixed investment and exports contributing to growth."

Reporting by Frank Prenesti for Sharecast.com