Eurozone growth slips as Russia-Ukraine war pushes up energy costs
Warning lights are flashing in the eurozone economy, with first-quarter growth in France stalling and shrinking in Italy, as Russia’s war in Ukraine drives up energy costs across the continent.
Figures from Eurostat, the EU’s statistics body, showed growth in GDP across the single currency area slipped to 0.2% in the first three months of 2022, down from 0.3% in the final quarter of 2021, when Omicron weighed on activity.
City economists had forecast a growth rate of 0.3% for the 19 euro area countries, highlighting the economic risks from the war in Ukraine amid soaring wholesale oil and gas prices exacerbated by the conflict.
Raising the spectre of stagflation as living costs soar while growth in GDP falters, France’s economy unexpectedly ground to a halt in the first three months of the year, recording zero growth as supply chain disruption and higher energy costs held back activity.
Italy’s economy shrank, Spain lost momentum, while Germany rebounded from a contraction in the fourth quarter when Omicron and supply chain problems had weighed heavily on the euro area’s largest economy.
Suggesting a weaker period ahead as the conflict continues to push up the price of energy, hitting net importers of gas across the continent, separate figures for April showed eurozone inflation hit a record high of 7.5%.
Prices jumped by 0.6% in April alone. Energy was the biggest single factor, driving up costs with a 38% year-on-year increase as wholesale prices for oil and gas soared, amid fears over disruption to supplies across the continent as the war continues.
The figures come as the European Central Bank faces pressure to raise interest rates, with inflation more than three times its official 2% target rate.
Economists said the
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