Eurozone growth slowed in the first quarter while inflation hit a fresh record high in April, data released by the EU statistics agency showed Friday, stoking fears of stagflation, according to Politico.
Economic growth slowed to 0.2% on the quarter from 0.3% in the final three months of last year. At the country level, GDP grew by 0.3% in Spain and 0.2% in Germany, while France stagnated and Italy contracted.
Overall, the GDP numbers point to a sharp slowdown across the eurozone after a broad rebound in 2021. On the year, eurozone growth was up 5.0%.
Looking ahead, the uncertainty caused by the war in Ukraine, which started toward the end of the first quarter, as well as surging inflation are expected to further weigh on growth.
Inflation accelerated further to 7.5% in April from 7.4% in the previous month. High prices continue to be driven primarily by energy costs, which were up 38% on the year. Core inflation, which excludes the volatile factors of food and energy, accelerated from 3.2% to 3.9% — suggesting that high prices are becoming more entrenched.
Looking at member states, the Baltics were hit hardest. In Estonia, prices were up 19%, in Lithuania 16.6% and in Latvia 13.3%.
In the largest member states, by contrast, inflation remained comparatively contained. France was among the lowest, with 5.4%. In Italy, inflation was 6.6%, and in Germany, 7.8%.
Amid signs that rising prices are feeding through the economy, concerns are growing that an inflation spiral will add pressure on the European Central Bank to tighten monetary policy. However, slowing economic growth complicates such a move, as tighter monetary policy risks choking off the post-pandemic recovery.