European Economy Scrapes Out Meager Growth in Q1 Amid Inflation

The European economy grew by a scant 0.1% in the first quarter of the year, as inflation continues to rise and eats into consumer spending power.

Inflation has become a major hurdle to economic growth, with food prices rising by 15.5% in March while energy prices have dropped by 0.9% from the previous year.

This has led to wage increases being insufficient to keep up with the high cost of living, prompting consumers to hold onto their paychecks.

The growth figure in Q1 is disappointing and follows similarly low U.S. growth estimates, fanning fears of a looming recession in the world’s largest economy.

Eurozone managed to avoid a winter recession, thanks to the mild weather, which alleviated pressure on natural gas supplies, allowing construction activity to begin earlier.

The countries that use the euro currency saw a quick surge in growth from January to March, after registering zero growth in the final three months of 2022.

However, annual inflation in the eurozone was 6.9% in March, up from 8.5% the previous month, well above the European Central Bank's target of 2%.

The ECB’s rate increases to curb inflation could make credit more expensive, which may lead to slower economic growth.