The European Union’s (EU’s) economy managed to grow by 0.3 percent in this year’s first quarter, even though Germany’s – Europe’s largest economy – flatlined for the period, showing neither growth nor contraction, the Financial Times reported. 

Germany’s economy showed recovery from its 0.5-percent slump in the previous quarter but fell short of the 0.2-percent expansion economists in a Reuters survey had foreseen.

The EU’s economy had dipped by 0.2 percent in the final quarter of 2022, The Wall Street Journal noted.

The 20 countries united by the euro currency produced a 0.1-percent GDP gain.

Once again, the EU squeaked past a looming recession, one that was widely predicted in November after last year’s energy and cost-of-living crises sparked by the war in Ukraine and Western sanctions on Russian exports.

Growth also peaked above the current banking crisis and the European Central Bank’s (ECB’s) persistent increases in its interest rate.

France, Italy, and Spain—the union’s other leading economies—all showed gains, with Italy and Spain each growing 0.5 percent, more than had been predicted.

The union’s economy is now 1.3 percent larger than a year ago, the FT noted.

Although domestic demand stagnated or, in some countries, declined, export demand rose, in large part because of China’s stronger-than-expected first-quarter recovery. 

The U.S., Europe’s second-largest trading partner, saw a slight slowing of its economy during the quarter.

Growth is broadly expected to accelerate this quarter as households use less energy, giving them more money to spend on other things, the WSJ noted.

Inflation in Germany moderated to 7.6 percent in April from 7.8 percent in March. In France, prices rose 6.9 percent last month compared to 6.7 percent in March.

The EU’s economy will grow by 0.2 percent this quarter, according to economists responding to the Reuters poll.

Continued growth may prod the ECB to lift rates higher for longer as it insists on driving down inflation to a 2-percent annual rate. The central bank already had signaled a hike of at least a quarter point when it meets this week.

With growth already barely holding on, a rise in interest rates is likely to push the region’s economy into recession later this year or early next, several analysts have warned.

TRENDPOST: Like the U.S., Latin America, and much of the rest of the world, Europe is mired inDragflation, an economy in which productivity is falling and prices are rising.  Dragflation was one of our Top Trends for 2022 and will continue to define much of the world’s economy for at least the rest of this year.

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