Eurozone recovery begins and other economics stories to read

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Kate Whiting, Senior Writer, Forum Agenda

• This weekly round-up brings you the latest news from the world of economics and finance.
• Top economy stories: Eurozone returns to growth; Japan’s economy declines; inflation slows in US.

1. Eurozone shows signs of slow recovery

The Eurozone economy grew by 0.3% in the first quarter of 2024, indicating a slow recovery after six quarters of stagnant or negative growth, Eurostat data shows.

Growth was -0.1% in the second two quarters of 2023, meaning the bloc was in a technical recession.

Spain showed the strongest performance with 0.7% growth, while Germany, France, and Italy were around the Eurozone average.

Employment grew by 0.3% in the first quarter, reflecting firms’ anticipation of a rebound in growth.

The European Central Bank raised interest rates to slow growth and inflation, but firms retained workers, unlike in past recessions.

2. Japan economy shrinks in Q1

Japan’s economy experienced a faster than expected decline in the first quarter, largely due to the weak yen affecting consumers.

The preliminary GDP data from the Cabinet Office on 16 May revealed a 2% annualized shrink in January-March, surpassing economist predictions.

The fourth quarter of 2023 also saw minimal growth, mainly due to decreased capital expenditure.

Despite potential revisions in final data, the overall decline in all GDP components indicates a lack of significant growth drivers in Japan’s economy for the first quarter.

It may mean the Bank of Japan puts a pause on raising interest rates again, after a rate hike in March for the first time since 2007.

Yoshimasa Maruyama, Chief Market Economist at SMBC Nikko Securities, told Reuters: “It would be possible that the timing of rate hikes could be pushed back depending on how the GDP may rebound in the current quarter.”

3. News in brief: Stories on the economy from around the world

Consumer prices in the US rose less than anticipated in April, indicating that inflation is likely on a downward trend at the beginning of the second quarter. Interest rates are expected to be lowered as early as July.

It comes as data showed an unexpected drop in production at US factories in April, due to a decline in car manufacturing. Manufacturing output fell by 0.3%, following a revised 0.2% increase in March, according to the Federal Reserve.

Nigeria’s headline consumer inflation reached a 28-year high of 33.69% year-on-year in April. This was an increase from 33.20% in March, according to data from the National Bureau of Statistics.

Inflation in Germany rose to 2.4% in April, up from 2.3% in March, according to the federal statistics.

China has taken a significant step to stabilize its struggling property sector. The central bank will provide 1 trillion yuan ($138 billion) in additional funding and has relaxed mortgage rules.

China’s industrial output grew 6.7% year-on-year in April, up from 4.5% in March, according to the National Bureau of Statistics.

Government data showed India’s merchandise trade deficit was wider than expected in April due to lower exports and a surge in gold imports.

Regular wages in the UK grew by 6% year-on-year in the first quarter, according to the Office for National Statistics, while total pay, which includes more volatile bonus payments, rose by 5.7%.

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4. More on finance and the economy from Agenda

Zimbabwe has introduced a new currency called the ZiG. Zimbabwe’s central bank said the country is “recalibrating its monetary policy framework”. However, it remains to be seen whether the ZiG can gain the confidence of consumers. Here’s what you need to know.

Too few companies pay their workers a living wage, despite mounting evidence that a living wage lifts people out of poverty and strengthens businesses, writes Sanda Ojiambo, CEO and Executive Director of UN Global Compact. In an age of abundance, inequality is growing for more than 70% of the global population, even in advanced economies.

The Middle East and North Africa (MENA) region was in the spotlight at the World Economic Forum’s Special Meeting on Global Collaboration, Growth and Energy for Development held in Saudi Arabia last month. Experts discussed the prospects for economic growth and stability and the challenges facing the region. Here are some key takeaways from a session on the economy of MENA.