Introduction: The French economy came to a halt in the first quarter
Good morning and welcome to our ongoing coverage of business, the global economy and financial markets.
France’s economy came to a sudden halt as the energy crisis, inflation and supply chain problems exacerbated by the war in Ukraine hit growth.
French GDP remained unchanged in the first quarter of this year, weaker than the expected growth of 0.3% of economists, according to official data released this morning.
After growing by 0.8% in October-December, France’s growth stalled in January-March, according to statistics agency INSEE.
This is a sign of the economic damage caused by rising energy and raw material prices and the disruption of the supply chain from the war in Ukraine.
Household spending fell 1.3 percent, a signal that rising inflation is hitting domestic budgets and confidence, despite France’s 25 billion-euro support package for energy bills.
* FRENCH ECONOMY STAGES IN THE FIRST QUARTER; EST 0.3% GROWTH
* FRANCE’s GDP GROWS 5.3% IN THE 1ST QUARTER OF THE YEAR; EST + 5.5%
– Nour Eldeen Al-Hammoury (@NourHammoury) April 29, 2022
We learn at 10 am how the wider eurozone performed in the first quarter, with growth data expected from Germany, Spain and Italy this morning.
Belgian and French GDP were under consensus, especially in the case of France, as consumption shrank. Spain follows in an hour or so. pic.twitter.com/3Z5mOzIZcV
– Oliver Rakau (@OliverRakau) April 29, 2022
France’s delay will increase health concerns in the global economy.
Yesterday we learned that the US economy contracted unexpectedly in the first quarter of the year, contracting by -0.4% in the first quarter or -1.4% on an annual basis.
This was the weakest quarter of the United States since the first days of the pandemic, as the growing US trade deficit reduced GDP.
Supply chain problems and the continuing pandemic continue to hit companies. Apple warned last night that chip shortages and plant shutdowns could cost China up to $ 8 billion in revenue this quarter.
This is another sign that the world economy is slowing down. The US economy contracted unexpectedly in the first quarter of the year, contracting by -0.4% in the first quarter or -1.4% on an annual basis.
This was the weakest quarter of the United States since the first days of the pandemic, as the growing US trade deficit reduced GDP.
Supply chain problems and the continuing pandemic continue to hit companies. Apple warned last night that chip shortages and plant shutdowns could cost China up to $ 8 billion in revenue this quarter.
We receive the full report on eurozone growth at 10 am, along with new inflation data.
Elsewhere, Russia’s central bank may cut interest rates today, probably from 17% to 15%, as it continues to delay the urgent doubling of borrowing costs from February (up to 20%) to support the ruble following the Ukrainian invasion.
The agenda
- 10 am BST: Eurozone Growth Report for the first quarter of 2022
- 10 am BST: Euro area inflation report for April
- 11.30 am BST: The Bank of Russia sets interest rates
- 13:00 BST: Press conference of the Bank of Russia
- 13.30 BST: Measuring personal consumption inflation in the United States
Eurozone growth slows to 0.2%
Just now: Growth in the eurozone slowed to almost a drop last month as rising energy prices and supply chain disruptions intensified by the war in Ukraine hit the economy.
Euro area GDP grew by 0.2% in January-March, compared to 0.3% in October-December.
France’s stagnant economy and 0.2% contraction in Italy took the luster of Germany’s return to growth.
Growth in the wider EU also slowed to + 0.4% from + 0.5%
Updated at 10.09 BST
Despite a return to growth in the first quarter, the German economy will be weak this quarter, predicts Oliver Rakau, chief German economist at Oxford Economics:
Here is his attitude to this morning’s GDP report:
German GDP grew moderately by 0.2% quarter on quarter in the first quarter. As usual, @destatis did not break down the first estimate, but mentioned higher investment while net trading was hampered. Unusually warm January / February probably supported construction investment in the first quarter, but the turnaround in the second quarter probably 1/5 pic.twitter.com/mysrEIR2Rg
– Oliver Rakau (@OliverRakau) April 29, 2022
Destatis did not mention consumption, which usually suggests that it is stagnant. This would be in line with mobility data. The reported deviation from IMO net trade contradicts the data for January / February, so it points to a very bad March (obviously quite possible). 3/5 pic.twitter.com/U1peURlqWt
– Oliver Rakau (@OliverRakau) April 29, 2022
What does this mean for Q2? Mobility data show a sharp increase in the cost of consumer services, but consumer confidence suggests the opposite, which I believe implies a major reduction in the cost of goods. The IP is likely to shrink and the investment will pay off for the strong Q1. 4/5
– Oliver Rakau (@OliverRakau) April 29, 2022
So while Q1 was better than I expected, I think this only offsets the expected weakness towards Q2 despite the momentum of reopening and a sustainable labor market. 5/5 https://t.co/mu8ecCpAqs
– Oliver Rakau (@OliverRakau) April 29, 2022
Updated at 09.59 BST
Italy is at risk of recession as the economy contracted by 0.2% in the first quarter
However, Italy’s economy is on the brink of recession.
Italy’s GDP contracted by 0.2% in the first quarter of 2022, the first contraction since the end of 2020.
This is a sign that the disturbances of the pandemic, the high prices of raw materials and the war in Ukraine could affect the activity, as we saw with France this morning.
The statistical authority ISTAT reports that the Italian economy was 5.8% bigger than a year ago, after recovering in 2021, adding:
The change from quarter to quarter is the result of an increase in value added in agriculture, forestry and fisheries, a decrease in that of services and a steady state in industry. On the demand side, there is a positive contribution from the domestic component (gross change in inventories) and a negative contribution from the net component of exports.
Growth in Spain was slower than expected in the last quarter.
Spain’s GDP grew by 0.3% in January-March, below the expected 0.5% and a sharp slowdown in growth of 2.2% in the last quarter of 2021.
Reuters has more details:
Spiral inflation, exacerbated by the crisis in Ukraine and the strike of truck drivers in Spain in March, reduced household spending by 3.7% in the quarter, according to the National Statistical Institute.
On an annual basis, production grew by 6.4%, roughly according to a Reuters study of 6.5% growth as the economy recovered from the first quarter of 2021, when Spain was hit by a huge snowstorm that interrupted transport lines with the capital.
Germany avoids a recession of 0.2%.
Germany has returned to growth as Europe’s largest economy avoids being dragged into recession by the war in Ukraine.
Germany’s GDP grew by 0.2% in the January-March quarter, boosted by an increase in investment, although net trade had a negative impact.
This was followed by a 0.3% contraction in the last quarter of 2021, when restrictions on the Omicron option and supply chain problems hit its economy. This means that Germany has avoided two-quarters consecutive declines in growth.
However, the Federal Statistical Office warns that the conflict in Ukraine has harmed the German economy over the past two months.
Economic performance rose slightly in the first quarter of 2022 after the recovery of the German economy last summer and declined in late 2021.
This is mainly due to higher capital formation, while the balance of exports and imports had a downward effect on economic growth.
The economic consequences of the war in Ukraine have had an increasing impact on short-term economic development since late February.
German economists and government ministers have warned that a ban on Russian gas imports could plunge Germany into recession this year amid pressure to cut funding for Russia.
Updated at 09.24 BST
Rising house prices in the UK are slowing
Rising house prices in the UK have slowed from their highest level in 17 years.
The average house price rose 12.1% in the year to April, according to construction company Nationwide. This is a decline of 14.3% in March, the highest level since the end of 2004.
Prices rose 0.3% in April, down 1.1% in March, raising Nationwide’s index to a new record of £ 267,620.
Robert Gardner, chief economist at Nationwide, predicts the slowdown will continue as pressure on household budgets and interest rates continues to rise.
We continue to expect the housing market to slow in the coming quarters.
The decline in household incomes is expected to intensify, with inflation expected to rise further, possibly reaching double-digit levels in the coming quarters if global energy prices remain high.
In addition, assuming that labor market conditions remain strong, it is likely that the Bank of England will raise interest rates further, which will also have an impact on the market if it is strengthened by mortgage interest rates.
🏡 Slight slowdown in Nationwide’s housing price index this morning (relatively speaking). Prices in April rose by 12.1% year on year against 14.3% in March, which was the largest increase since 2004, extended availability and more. pic.twitter.com/I6gjQpe3DZ
– David Milliken (@david_milliken) April 29, 2022
Updated at 09.09 BST
Kaliena Makortof
NatWest reported a 40% jump in first-quarter profits, but warned of the UK’s “uncertain” economy amid the cost-of-living crisis, saying it had already turned more than 2,000 clients to debt experts at Citizens Advice.
The banking group – formerly known as the Royal Bank of Scotland – exceeded expectations after reporting a jump in pre-tax profits to £ 1.2 billion from £ 885 million a year earlier. This was compared to analysts’ forecasts of a 15% drop in profits to £ 755 million.
Its strong results for the first quarter – for the first time since the UK government’s share of the group fell below 50% last month – were backed by mortgages, higher interest rates and consumer recovery …
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