Eurozone Economy Recovers On Household Spending, Trade

(RTTNews) - The euro area economy recovered as initially estimated in the first quarter, driven by household spending along with favorable net exports, the latest data from Eurostat showed on Friday.

Gross domestic product grew 0.3 percent sequentially, reversing the 0.1 percent fall in the final quarter of 2003. The rate confirmed the second estimate published on May 15.

Expenditure breakdown showed that household consumption advanced at a stable rate of 0.2 percent over the quarter, while government spending remained stable.

Net foreign demand was favorable in the March quarter, as exports rose 1.4 percent offsetting a 0.3 percent fall in imports.

The negative contribution came from gross fixed capital formation, which fell 1.5 percent in the euro area. Data showed that changes in inventories also contracted by 0.3 percent.

On a yearly basis, economic growth improved to 0.4 percent from 0.2 percent. That was in line with the initial estimate for the first quarter, while the December quarter figure was revised up from 0.1 percent. The yearly expansion was attributed to increases in household and government expenditures.

In the EU, overall GDP advanced 0.3 percent in the March quarter after remaining flat in the preceding three-month period. The annual growth accelerated to 0.5 percent from 0.3 percent.

Among member states, the strongest quarterly economic growth was seen in Malta with a 1.3 percent expansion, followed by an expansion of 1.0 percent in the Croatian economy.

The quarterly growth in employment remained unchanged at 0.3 percent in the first quarter, as estimated. Meanwhile, the annual rate of increase slowed to 1.0 percent from 1.2 percent.

The European Central Bank on Thursday projected Eurozone economic growth at 0.9 percent this year, 1.4 percent next year and 1.6 percent in 2026.

The ECB this week cut interest rates for the first time since 2019, citing an improvement in the inflation outlook. However, the central bank maintains caution regarding price developments given the stickiness of services inflation and wage growth.