French, Spanish and Austrian growth beats forecasts, boosting hopes eurozone technical recession is over – business live

France's growth picks up to 0.2%

Newsflash: France’s economic growth has accelerated in the first quarter of this year, beating expectations.

In an encouraging start to eurozone GDP day, French GDP expanded by 0.2% in January-March, a pick-up on the 0.1% growth recorded in October-December.

Economists had only expected growth of 0.1%, so this may bolster hopes that the eurozone has returned to growth.

Household spending helped drive the French economy, statistics body INSEE says, with final domestic demand bouncing back and contributing 0.4 percentage points to growth.

But foreign trade’s contribution to GDP growth fell to zero, with imports rising by 0.2% and exports up by 0.5%.

Key events

Germany returns to growth

Here comes the big one, Germany’s GDP report…

And Europe’s largest economy has returned to growth!

German GDP expanded by 0.2% in the first quarter of 2024, the Federal Statistical Office (Destatis) reports, beating expectations of 0.1% growth.

Destatis says this “modest growth” was due to an increase in gross fixed capital formation in construction and in exports, while household consumption fell.

This follows a deeper-than-first-thought contraction at the end of laast year. Destasis reports that Germany shrank by 0.5% in Q4 2023, worst than the 0.3% previously estimated.

The number of people out of work in Germany rose more than expected in April, Reuters reports.

Federal Labour Office figures this morning show that the number of unemployed grew by 10,000 in seasonally adjusted terms.

Analysts polled by Reuters had expected that figure to rise by 9,000.

The Czech Republic grew faster than forecast in the first quarter of this year – continuing the theme of the morning!

Czech GDP rose by 0.5% in January-March, beating forecasts of 0.4% growth.

Growth was driven by domestic demand, including higher spending by households and investment by businesses.

Vladimír Kermiet, Director of the National Accounts Department of the Czech Statistical Office (CZSO), says:

“The total final consumption expenditure and an increasing external trade balance contributed to the year-on-year growth. Conversely, a decrease in gross capital formation continued,”

As the Czech Republic isn’t in the eurozone, this won’t help euro area GDP (due at 10am UK time), but it’s another sign that the European economy is growing this year.

On an annual basis, the Czech economy was 0.4% larger than a year ago

Austria returns to growth

Austria’s growth figures are also stronger than expected.

Austrian GDP expanded by 0.2% in the first quarter of this year, better than the 0.1% which economists forecast.

This is the first increase in GDP in a year, after the economy shrank by 1.3% in the second quarter of 2023, by 0.3% in Q3 2023, and then stagnated in Q4 last year.

Growth was driven by private consumer demand, while Austria’s industrial economy remained weak and |”almost stagnated”, think tank WIFO reports, while investment demand declined again.

Separately, inflation in Austria has fallen to an average of 3.5% in April, its lowest level since September 2021.

Spain's economy expands by faster-than-forecast 0.7%

Just in: Spain’s economy has grown faster than forecast.

Spanish GDP rose by 0.7% in the first quarter of this year, new data from statistics body INS showed.

That’s rather faster than the 0.4% growth which economists had expected – an encouraging sign, especially after France grew faster than forecast (see earlier post).

INS also revised up Spain’s growth in Q4 2023, to 0.7% from 0.6%.

On an annual basis, Spain’s economy grew by 2.4%, mostly driven by “national demand”, with “external demand” contributing 0.2 points.

This stronger-than-forecast growth should cheer Spain’s prime minister, Pedro Sánchez, who yesterday announced he would stay on as PM despite a “harassment and bullying operation” being waged against him and his wife by his political and media enemies.

Volkswagen posts 20% drop in first-quarter profit

German carmaker Volkswagen has revealed that its operating profits slumped by a fifth in the first quarter of this year.

Europe’s top automaker was hit by lower sales and higher costs, but is sticking to its revenue and margin targets for 2024.

Arno Antlitz, Volkswagen’s CFO and COO, says the results “show a slow start to the year”, but he insists that new models will help the company this year:

A strong March, the solid order bank and the improving order intake in the past months are encouraging and should already have a positive impact in the second quarter.

We expect additional momentum over the course of the year from the launch of more than 30 new models across all brands.

Volkswagen’s earnings before interest and taxes (EBIT) dropped by 20% to €4.6bn, while sales were down 2%.

French inflation drops

French inflation has slowed, despite a pick-up in energy prices.

France’s consumer price index rose by 2.2% per year in April, statistics body INSEE estimates, down from 2.3% in March.

The decrease was partly due to a slowdown in the price rises of food (1.2%) and tobacco (9%), and also to a slight drop (-0.1%) in the cost of manufactured goods.

However, energy inflation rose to 3.8% from 3.4% in March, while services inflation stuck at 3%.

French minister: facts are stubborn. French growth is progressing.

France’s economy minister has hailed today’s news that the French economy grew more than expected in the first quarter.

Bruno Le Maire declared that the government’s strategy was working, after GDP rose by 0.2% in January-March.

Le Maire says:

“To all those who want us to believe that our economy is at a standstill: facts are stubborn. French growth is progressing.

“This is a new sign showing the solidity of our economy,…[the] government’s strategy is paying off.”

This is the second piece of good news to drop into Le Maire’s inbox in a week. Two major credit-rating agencies, Moody’s and Fitch, left France’s rating unchanged last Friday, despite concerns about its large national debt and deteriorating public finances.

Hungary has returned to growth, in an encouraging sign for Eastern Europe’s economy.

Hungary’s gross domestic product grew by 0.8% in the first quarter of this year, new data shows, having previously stagnated with 0% growth in the last quarter of 2023.

Growth was driven by market services, such as real estate activities as well as information and communication, while the industrial sector shrank.

Whitbread cutting 1,500 UK jobs, and boosting returns for shareholders

Hotel firm Whitbread, which operates in the UK and Germany, is axing 1,500 jobs in a cost-cutting plan…. and boosting returns to shareholders.

Whitbread has today announced a new efficiency programme which will deliver £150m of cost savings over the next three years.

It says:

The plan we are announcing today will result in the reduction of around 1,500 roles out of a total UK workforce of 37,000.

While these plans are still subject to consultation, we will seek to find alternative opportunities wherever possible through the roles created by this plan and our existing recruitment process that makes c.15,000 hires each year.

We expect to retain a significant proportion of those affected who wish to remain with us and we will be providing dedicated support to our teams.

Whitbread announced the plan alongside its latest financial results, which show revenues rose 13% in the last financial year, while pre-tax profits grew 21%.

Its Premier Inn Germany division grew its sales by 62%, while its losses narrowed to £36m from £50m.

Whitbread investors can look forward to higher returns; the company’s board is recommending a 26% increase in the final dividend to 62.9p per share.

It also plans to start a new £150m share buy-back (exactly the amount it intends to save through cost-cutting!), to run through the first half of this financial year.

We haev encouraging economic news from Germany too, where consumer spending has risen faster than expected.

German retail sales grew by 1.8% in March, beating forecasts of 1.1% growth, and largely reversing the 1.9% drop recorded in February.

The broader picture is that France’s economy has only grown modestly over the last nine months.

The 0.2% rise in GDP in January-March reported this morning follows two quarters of 0.1% growth.

France's growth picks up to 0.2%

Newsflash: France’s economic growth has accelerated in the first quarter of this year, beating expectations.

In an encouraging start to eurozone GDP day, French GDP expanded by 0.2% in January-March, a pick-up on the 0.1% growth recorded in October-December.

Economists had only expected growth of 0.1%, so this may bolster hopes that the eurozone has returned to growth.

Household spending helped drive the French economy, statistics body INSEE says, with final domestic demand bouncing back and contributing 0.4 percentage points to growth.

But foreign trade’s contribution to GDP growth fell to zero, with imports rising by 0.2% and exports up by 0.5%.

HSBC CEO Noel Quinn steps down after 'intense five years'

There’s big news in the banking sector this morning: HSBC’s chief executive officer Noel Quinn is unexpectedly stepping down after nearly 5 years in the job.

The board has begun a formal process to find a successor, firing the starting gun to find a replacement at Europe’s largest bank.

Quinn is stepping back after leading a series of strategic reviews, boosting HSBC’s investment in its Asian business while cutting back on other markets such as France and the US.

Looking ahead, Quinn explains why he’s stepping down:

“After an intense five years, it is now the right time for me to get a better balance between my personal and business life. I intend to pursue a portfolio career going forward.”

Quinn was appointed CEO in March 2020, after a stint as interim chief executive, and steered the bank through the Covid-19 pandemic.

Inflation in UK shops slows amid price cuts on clothes and shoes

There’s good news for UK shoppers this morning – prices are rising at their slowest rate since late 2021 this month, with non-food goods actually cheaper than a year ago.

Deep discounts by clothing and footwear retailers put the brakes on inflation, the latest snapshot of high street spending trends has shown.

The monthly bulletin from the British Retail Consortium (BRC) – the lobby group for the industry – found that the battle by store owners to offload summer stock in cold and wet weather meant prices in non-food stores were lower this month than a year earlier.

The BRC said the cost of non-food goods fell at an annual rate of 0.6% in April, while the price of food increased by 3.4%, down from 3.7% in March. Taken together, food and non-food inflation stood at 0.8% in April, compared to 1.3% in the year to March – the lowest level since December 2021.

More here:

We already have some idea how the eurozone fared in the first quarter of this year, as Ireland and Belgium both released growth data yesterday.

Ireland’s GDP rose by an impressive-sounding 1.1%. in January-March, led by a rebound in its tech sector.

That means Ireland’s technical recession has ended, after its GDP shrank through 2023, including a 3.4% contraction in October-December 2023.

GDP isn’t a great way of measuring Ireland’s economy, though, as the data is distorted by multinational companies based in the Republic.

Belgium’s data was altogether calmer – its GDP expanded by 0.3% in January-March, for the fourth quarter in a row.

Introduction: It's eurozone GDP (and inflation) Day

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

The eurozone economy is in the spotlight today with new growth figures, and inflation data, being released across the single currency bloc.

Having been held back by high interest rates, and the cost of living squeeze, economists are hoping the eurozone returned to growth in the first quarter of this year.

Analysts predict that eurozone GDP grew by 0.1% in January-March quarter. That would pull the region out of a shallow recession, after it contracted by 0.1% in the third and fourth quarters of last year.

Analysts at Investec are hopeful that we’ll see some growth in the eurozone:

Focus will also be on the inflation outlook in the Eurozone, with flash HICP for April due on Tuesday. This will be released at the same time as Q1 GDP. Recent revisions now mean that the Eurozone was in a technical recession in H2, albeit by the slimmest of margins.

Given that economic data at the start of 2024 has been more positive, we expect the Eurozone exited that recession in Q1, with a 0.1% quarterly expansion in output.

Inflation is expected to remain unchanged at 2.4% in April, while core inflation could slip to 2.6% from 2.9%.

Easing inflationary pressures could leave the European Central Bank free to start cutting interest rates in June – especially if growth were to disappoint…

Also coming up today

Frankly, it could be a monster day for news.

For starters, new post-Brexit charges on imports of EU food and plant products into Britain begin today. Fees of up to £145 will apply to small imports of animal products and plants, such as sausages, cheese and yoghurt, entering the UK from the EU through the port of Dover and through Eurotunnel at Folkestone.

A flurry of big name companies are reporting financial results today; we’ll hear from Whitbread, Glencore, Prudential, St James’s Place and Howdens, while HSBC has just reported a small (1.5%) dip in profits for the last quarter, to $12.7bn.

Over in Europe, Mercedes-Benz, Volkswagen, Adidas and Lufthansa are reporting, while on Wall Street McDonalds, Coca-Cola and Amazon will update the markets.

Mining giant Anglo American is holding its annual general meeting, days after fending off a takeover proposal from rival BHP Group, who are now considering whether to improve their offer…

And in parliament, MPs on the Treasury committee are holding an inquiry into financial sanctions on Russia this morning, while the Environment, Food and Rural Affairs Committee will question supermarket bosses about food price inflation, profits and relationships with producers this afternoon.

The agenda

6.30am BST: French GDP for Q1 2024

7am BST: German retail sales for March

7.30am BST: Hungarian GDP for Q1 2024

7.45am BST: French inflation report for April

8am BST: Austria’s GDP report for Q1 2024

8am BST: Czech Republic GDP report for Q1 2024

8am BST: Spain’s GDP report for Q1 2024

9am BST: Germany’s GDP report for Q1 2024

9am BST: Italy’s GDP report for Q1 2024

9.30am BST: Portugal’s GDP report for Q1 2024

9.30am BST: UK mortgage approvals and consumer credit data for March

10am BST: Eurozone GDP report for Q1 2024

10am BST: Eurozone inflation report for April

10.15am BST: UK Treasury committee holds opening session of inquiry into Russian financial sanctions

1pm BST: Mexico’s GDP report for Q1 2024

1.30pm BST: Canada’s GDP report for February

2pm BST: US house price index for February

2.30pm BST: Supermarket bosses appear at a Efra select committee hearing on food supply chains