Eurozone GDP Q4 2022

The eurozone beat expectations on Tuesday by posting positive growth in the last quarter of 2022 and easing fears of a possible regional recession.

Preliminary Eurostat data released on Tuesday showed the euro zone grew 0.1% in the fourth quarter. Economists had pointed to a contraction of 0.1% over the same period, according to Reuters.

The latest figures come after the eurozone recorded a 0.3% increase in GDP in the third quarter of last year.

The region came under significant pressure following Russia’s invasion of Ukraine, as high food and energy costs compounded long-standing bottlenecks in the supply chain. supply. Last year, economists warned that the 20-member region could be on the verge of an economic recession.

Energy prices cooled in the latter part of 2022, bringing some relief to the overall economic performance of the Eurozone.

The eurozone is expected to have grown 1.9% in the fourth quarter, compared to the same period of 2021, according to preliminary data.

“The leading report on eurozone GDP shows that economic growth slowed again in the fourth quarter but did not fall completely, defying the message from business surveys,” said Melanie Debono, senior economist Europe at Pantheon Macroeconomics, in an email to clients.

However, Germany was surprised by the downside in terms of the breakdown by country. Europe’s biggest economy contracted by 0.2% in the final quarter of 2022, with analysts now expecting Berlin to slip into recession.

“Germany probably entered a shallow and short recession in the fourth quarter that will last until the first quarter before the economy stabilizes in the second quarter (of this year),” said Salomon Fiedler, an economist at Berenberg. , in a note on Monday.

Italy, the region’s third-largest economy, also recorded negative growth — down 0.1% in the fourth quarter. Rome and Berlin had some of the strongest ties to Russian gas.

“Taking today’s data at face value, the Eurozone likely avoided entering a technical recession this quarter, period. This will encourage the ECB to continue its steep tightening path to combat inflation,” said Debono of Pantheon Macroeconomics.

The ECB is due to meet and determine its next monetary policy steps on Thursday. Economists polled by Reuters and Factset predict the bank will agree to a 50 basis point interest rate hike, taking its key rate to 2.5%.

Market participants will be listening closely to ECB President Christine Lagarde for clues as to how many more rate hikes may occur in the coming months.

Some economists say the euro zone is still on the verge of falling into recession later this year.

“Looking ahead, we believe the Eurozone (excluding Ireland) will slide into recession in the first half of this year as the effects of ECB policy tightening intensify, households struggle with the cost crisis life and external demand remains sluggish,” he added. Andrew Cunningham, the chief economist for Europe at Capital Economics, said in an email on Tuesday.

“But that won’t deter the ECB from continuing with its plans to hike rates, including by 50 basis points on Thursday,” he added.