German economy acted as a drag on the rest of Europe in Q1
The eurozone technically fell into recession in the first quarter of this year following the release of revised GDP data which showed the bloc contracted by 0.1% in Q1 – the same level of downturn as was seen in Q4 of 2022. Ireland, Greece, Germany, some of the Baltic states and the Netherlands all contracted in the first quarter, despite the rest of the eurozone showing some modest growth. It should not be much of a surprise that with Germany already having been confirmed to be in a technical recession, it was a drag on the rest of Europe’s growth. Normally this would all give reason for the European Central Bank to pause rate rises, but this GDP data is old, stale and more reflective of the painful winter energy crunch that has now largely dissipated. Indeed, the bloc now looks to be growing once again so we believe a hike next week is still live.
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