Key insights
- Eurozone GDP growth slowed to 0.1% in Q1, below expectations, amid geopolitical tensions and rising energy prices. Weakening business sentiment and tighter credit conditions suggest further slowdown. This complicates the ECB's response to rising inflation, potentially delaying or reducing the magnitude of future rate hikes, which could negatively impact US equities due to global economic interconnectedness.
FRANKFURT, April 30 (Reuters) - The euro zone economy saw faint growth in the first quarter, a preliminary estimate showed on Thursday, offering the first snapshot of activity since the outbreak of the Iran conflict.
The energy-importing euro zone is seen as particularly vulnerable among advanced economies to disruptions in oil, gas and other shipments through the Strait of Hormuz, which began in late February.
Eurostat said gross domestic product in the 21-country currency area rose 0.1% quarter-on-quarter in the three months to March, according to a flash reading, lagging economists’ forecasts and the pace recorded in the previous quarter, both at 0.2%.
A string of surveys this week points to a further slowdown in activity, with business sentiment weakening, services deteriorating, profits falling and exports still hit by tariffs, while banks signal tighter credit conditions.
The subdued backdrop complicates the European Central Bank’s response to an emerging, energy-driven rise in inflation.
The ECB is widely expected to keep rates unchanged on Thursday, though markets are pricing in three to four increases over the coming year.