Eurozone GDP grows 0.1% in first three months of 2023

The eurozone economy lumbered forward in the first quarter, official data showed Friday, expanding just 0.1 per cent over the previous quarter as high inflation and interest rates weigh on activity.

Germany, the EU's biggest economy, saw growth stagnate at zero per cent over the previous quarter. Year-on-year, Germany was the only country in the single-currency zone to record a contraction, of 0.1 per cent.

For the European Union overall, GDP expanded 0.3 per cent over the previous quarter, according to the figures from Eurostat, the EU's statistics office.

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The weak-but-positive figure for the eurozone mirrored the reading for the last quarter of 2022, which was also 0.1 per cent growth, confirming it had escaped recession but that high inflation was still a dampener.

Although eurozone inflation has eased somewhat, it is still 6.9 per cent on an annualised basis, more than three times the European Central Bank's target of 2.0 per cent.

The ECB holds its next meeting on Thursday, and all eyes are on it to see if it raises rates yet again, and if so by how much.

The central bank has raised rates by 3.5 per cent since July last year and its chief economist, Philip Lane, said this week that "this is still not the right time to stop".

Eurostat's preliminary data suggested Germany was still struggling from the fallout of Russia's war in Ukraine, especially the shift away from Russian gas that has powered much of its industry.

The strongest quarter-on-quarter GDP performer was Portugal, with growth of 1.6 per cent, followed by Spain, Italy and Latvia all on 0.5 per cent.

Quarter-on-quarter declines were recorded for Ireland, at 2.7 per cent, and Austria, at 0.3 per cent.

Economic analysis firm Oxford Economics said the Eurostat data for the eurozone was slightly lower than its estimate of 0.2 per cent.

It said "we don't expect growth to pick up meaningfully over the course of 2023" and that a strong start for industry early this year "will likely be short lived" as inflation and a tougher financial climate weigh on growth.