Its economy Eurozone continues to exceed our expectations. While we previously forecast a slight decline GDP in the first quarter of 2023, data for January and February, as well as data for the month of March, show that, on the contrary, the economy is moderately development. Therefore, we are revising our GDP forecast for the first quarter from -0.1% qoq to +0.2%. Combined with moderate downward revisions to GDP growth in the second and third quarters, our overall eurozone growth forecast for 2023 is 0.9% from 0.7%, which is 0.5% higher than Bloomberg’s forecast for GDP growth.

During the winter, the eurozone economy was supported by three factors. Firstlyconcerns about natural gas shortages subsided earlier than expected, which also led to a significant decline in the wholesale price of natural gas.

Secondlythe rapid easing of pressure in the supply chain allowed the industry to ramp up production. Thirdly, unusually warm weather in January and February stimulated the construction sector during these months. With growth of 1% m/m in January and 1.5% m/m in February, eurozone industry (excluding construction) gained 1.3% more in the first two months of this year compared to the average of the last three months. 2022.

Judging by the PMI index, the large service sector contributed to GDP growth in the first quarter. Although high, albeit slowing, inflation has weighed on private consumption, the data showed that the economy continued to grow modestly in the first quarter of this year.

If the data shows that the economy also grew in March, rather than receding after a strong February, as we expect, then first-quarter growth in the eurozone could beat our new forecast for GDP growth of 0.2% qoq. Of course, the good news is not limited to the eurozone. After a 0.4% m/m GDP growth in January, UK GDP was flat in February as a 2.4% m/m increase in manufacturing offset a slight decline in manufacturing and services.

* Messrs. Holger Schmieding, Callum Pickering and Salomon Fiedler are economists at Berenberg Bank.