France’s economy rebounded at the start of 2023 while Spanish growth exceeded expectations — reinforcing belief that Europe will continue to avoid a recession.
(Bloomberg) — France’s economy rebounded at the start of 2023 while Spanish growth exceeded expectations — reinforcing belief that Europe will continue to avoid a recession.
Output rose by 0.2% in France, defying fears that strikes over pension reform would drag down activity. In Spain, it jumped by more than double that. A busy morning for gross domestic product readings concludes with the 20-nation euro zone at 11 a.m.
There was bad news on the inflation front, however, with both countries reporting that consumer-price gains accelerated this month. The figures will fuel the debate over how big an interest-rate hike the European Central Bank will opt for next. The euro area’s own inflation reading is due just two days before the ECB’s May 4 decision.
Key Developments
- ECB INSIGHT: What it Would Take to Trigger 50-Bp May Hike
- Europe’s Economic Confidence Edges Higher on Consumer Optimism
- ECB to Slow Rate-Hike Pace Next Week Before Hitting Peak in July
French Finance Ministry on inflation (9:05 a.m.)
Despite the acceleration, April’s figures are in line with forecasts and the slowdown in food-price gains is “encouraging,” the Finance Ministry said.
It attributed the strength in energy inflation to base effects.
Spanish GDP, inflation (9 a.m.)
First-quarter growth accelerated as investment and tourism remained strong despite high inflation.
GDP advanced 0.5% from the previous three months — above the 0.3% median forecast in a Bloomberg survey of economists.
Inflation, meanwhile, quickened to 3.8% in April on energy costs. The move is just below the median estimate in a Bloomberg survey of economists and highlights the volatility in consumer prices after the measure almost halved in March to 3.1%.
Underlying inflation, which strips out energy and some food costs, slowed to 6.6%.
Austrian GDP (9 a.m.)
Austria’s economy contracted in the first quarter, according to the Wifo research institute, which estimates GDP dropped by 0.3% from the prior three months.
While Wifo says Austria can dodge a recession this year with 0.3% growth, recent data suggest it’s still struggling: A gauge measuring the manufacturing outlook fell to its lowest in almost three years in April.
French inflation (8:45 a.m.)
Inflation in the euro area’s second-largest economy unexpectedly accelerated to 6.9% in April on energy and services costs. That follows March’s 6.7% advance and is more than the median estimate in a Bloomberg survey of economists, which saw the rate holding steady.
While consumer-price gains remain below February’s 7.3% euro-era record, increases remained firm for the core goods and services that are keenly watched by the ECB as it decides how much further to lift interest rates.
The Insee statistics agency said services inflation quickened to 3.2% in April, while for manufactured goods it eased slightly to 4.7%. Having spent big to soothe the pain of soaring energy costs, the government wants to ease the spike in food prices. Supermarkets have agreed to take a hit on margins for staples.
Bank of France Governor Francois Villeroy de Galhau said this week that inflation is likely peaking and should slow to about 4% by year-end. But the central bank also raised its forecasts for underlying inflation, which excludes energy and food prices.
German regional inflation (8:15 a.m.)
Inflation in the German state of North Rhine-Westphalia fell to 6.8% in April from 6.9% in March, indicating a national figure roughly in line with forecasts.
Consumer prices posted a monthly increase of 0.5%, according to the state statistics office in Dusseldorf.
North Rhine-Westphalia is the first German state to report April inflation readings and can often be the first signal of the trend in the overall figure, which the German statistics office will release later Friday.
IMF cautions central banks (8 a.m.)
Europe’s central banks should be wary of potential dangers ranging from more financial stress to a divergence in bond yields as they stay the course with further interest-rate hikes, according to the International Monetary Fund.
France’s Le Maire on GDP (7:50 a.m.)
Finance Minister Bruno Le Maire said the return to growth confirms the French economy’s resilience.
Even as households — the biggest driver of GDP — are showing signs of weakness, Le Maire said in a statement that foreign trade is “dynamic”’ and figures show industrial output is growing once more.
“Our fundamentals are holding up,” he said. “Businesses continue to invest and create jobs, bringing us closer to our goal of full employment.”
French GDP, consumer spending (7:30 a.m.)
Growth in the euro area’s second-largest economy was in line with the 0.2% median estimate in a Bloomberg survey of analysts, thanks to a boost from trade as domestic growth drivers waned.
But statistics agency Insee revised down its estimate for the final three months of last year to zero from 0.1%.
The first-quarter expansion was supported by a boost from net trade as imports declined and exports remained dynamic, growing 1.1%.
The data show the unrest over President Emmanuel Macron’s raising of the pension age didn’t hobble the economy, with the Bank of France estimating that the hit was limited to a few sectors.
Yet there were signs of softer domestic demand with consumer spending failing to resume growth after contracting at the end of 2022 and total investment declining 0.2%
A separate release from statistics agency Insee showed consumer spending fell 1.3% in March from February as households cut back on food and manufactured-goods purchases. Economists polled by Bloomberg had expected a 0.5% increase.
Coming Up (all times CET)
- German unemployment (9:55 a.m.)
- German GDP (10 a.m.)
- Portuguese GDP (10:30 a.m.)
- Slovenian inflation (10:30 a.m.)
- Euro-zone GDP (11 a.m.)
- Italian GDP (11 a.m.)
- ECB President Lagarde speaks after Eurogroup meeting (11:45 a.m.)
- Portuguese inflation (12 p.m.)
- German inflation (2 p.m.)
–With assistance from Giovanni Salzano, Jana Randow, Ainhoa Goyeneche, Alonso Soto, Alessandra Migliaccio, Marton Eder, Joao Lima, Jan Bratanic, Joel Rinneby, Barbara Sladkowska, Kristian Siedenburg and Alexander Weber.
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