The French economy remained stagnant in the first quarter, while Italian production shrank. The Spanish economy also lost pace. Germany was the only one of the four largest EU economies to exceed expectations in the first three months of this year, but grew by a meager 0.2 percent from the previous three months. Rising consumer prices, persistent pandemic restrictions and the effects of the war in Ukraine have all affected economic activity in the first three months of this year, causing the Italian economy to shrink by 0.2% and France to have zero growth. and the Spanish economy slowed sharply. Falling household spending was the main brake on French growth, indicating that prolonged pandemic restrictions and higher food and energy prices hit retail spending and eroded consumer confidence. New price data on Friday showed that French inflation rose to 5.4% in April from 5.1% the previous month. Inflation is the highest level since the data series began in 1997, although it is still below the eurozone average of 7.4%. The disappointing growth rate is hampering the recent course of French economic outperformance, despite the fact that the eurozone’s second largest economy is benefiting from a more generous pre-election fiscal stimulus and lower inflation from many of its eurozone neighbors. The normalization of the French gross domestic product in the first quarter signals a sharp slowdown from the upgraded growth rate of 0.8% in the last three months of last year. Economists polled by Reuters forecast average 0.3% growth in the first quarter. The French National Statistics Office said on Friday that output was affected by a 1.3% drop in household spending, which offset a 0.2% increase in investment, while changes in inventories added 0.4 percentage points to growth and trade contributed 0.1 points. Jessica Hinds, an economist at Capital Economics, said that while this year’s drop in French consumer spending “was due in part to Covid cuts earlier in the quarter, it also reflected rising prices associated with the Ukraine war.” Hinds added: “The latter is likely to persist and will put additional pressure on the newly elected [president] “Emanuel Macron to offer more help to households.” Germany’s 0.2 percent GDP growth in the first quarter signaled a recovery from a 0.3 percent contraction in the previous quarter, meaning that Europe’s largest economy avoided a technical downturn, defined as two consecutive quarters of negative growth. Economists polled by Reuters had an average growth rate of 0.1%. The Federal Statistical Office said the expansion of the economy was “mainly due” to higher investment, while trade had a negative impact on growth. He said GDP was still 0.9 percent below its pre-pandemic level in the last quarter of 2019. “The economic consequences of the war in Ukraine have been increasingly impacting short-term economic growth since the end of February,” he said, adding that GDP figures were subject to “greater uncertainty than usual”. Italy’s 0.2% drop in GDP partially reversed growth by 0.6% in the previous quarter, leaving total output 0.4% below pre-pandemic levels, according to the Office for National Statistics. The contraction was in line with analysts’ expectations. Spain added to the bleak news for the European economy on Friday, citing a sharp slowdown in growth in the first quarter, reflecting the impact of rising inflation and a wave of Covid-19 infections. Spain’s quarterly GDP growth of 0.3% was a significant slowdown from the 2.2 per cent expansion between the third and fourth quarters of last year. It was also lower than the forecast for a 0.5% expansion by economists polled by Reuters. The moving start to the year in most eurozone economies showed that the bloc was likely to grow at a slower-than-expected pace in the first quarter. Quarterly data on Eurozone GDP are due to be released on Friday, and economists on average expect growth to be stable at 0.3%.
