Euro zone GDP Q1 2023

Skyscrapers of the city center can be seen from the Lohrberg in the north of Frankfurt. Photo: Arne Dedert/dpa (Photo by Arne Dedert/picture alliance via Getty Images)

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The euro zone economy grew by 0.1% in the first quarter of the year, preliminary figures showed on Friday, even as Germany’s GDP flatlined over the period.

A Reuters poll of economists forecast quarterly growth of 0.2%.

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Earlier this month, statistics agency Eurostat revised down its fourth-quarter GDP estimate for the bloc from 0.1% quarterly growth to no growth, following 0.4% growth in the third quarter.

National figures also published Friday showed the German economy stagnated in the first quarter, compared with the previous three-month period. It was up 0.2% on an annual adjusted basis and 0.1% lower on a non-adjusted basis due to one extra working day in the prior year, German statistics agency Destatis said.

Carsten Brzeski, global head of macro at Dutch bank ING, said the figures showed the euro zone’s largest economy had “not escaped the risk of a recession” despite a rebound in industrial activity, an easing of supply chain constraints and China’s reopening.

The figures will be keenly watched ahead of the May 4 meeting of the European Central Bank, which seeks to tackle headline inflation of 6.9% and core inflation at a record high of 5.7%.

Some ECB policymakers have stressed they believe they have further to go on interest rate rises as they weigh up a 25 basis point or even 50 basis point hike next week.

The central bank raised its three key interest rates by 50 basis points in March, taking the main rate to 3%, despite surrounding turbulence in the banking sector.

Nerves on the European front have largely settled and officials have underlined the strength of the sector, though the shadow of deposit flights and further volatility remains.

This is a breaking news story and will be updated shortly.

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