Europe’s economy scraped out meager gains at the end of last year as galloping inflation fed by high energy prices and Russia’s invasion of Ukraine deterred people from spending in shops and restaurants.
Economic output crept 0.1% higher in the last three months of 2022, European Union statistics agency Eurostat reported Tuesday, avoiding an outright downturn as warmer-than-usual winter weather shelved fears of energy rationing in Europe.
The countries that share the euro currency — 19 in 2022, now 20 after Croatia joined the eurozone in the new year — appeared to have avoided the worst case scenario: forced industrial shutdowns from running out of natural gas after Russia halted most supplies. Warm weather and efforts to find new supply that comes by ship instead of pipeline from Russia have eased that worry for now.
Nonetheless, natural gas prices are still three times higher than before Russia started massing troops on Ukraine’s border, after rising to a record high of 18 times that level in August. Those prices are hitting utility bills and leading companies to pass on costs to customers by charging more for goods and food.
Growth also faced headwinds from reduced activity in China, a major trade partner, due to the severe COVID-19 restrictions that have since been lifted. A possible economic rebound there is a key question for Europe and the global economy this year, given China’s previous role as a motor of global growth.
While underwhelming, Europe's growth figure at least raises the chance it will scrape by without a technical recession even if economic expansion is negative in the first three months of this year. Two straight quarters of falling output is one definition of recession.
The news comes as the International Monetary Fund raised its forecast for global economic growth this year to 2.9% from 2.7%, not great but an improvement based partly on hopes for China. A stronger global economy is important for Europe given its extensive trade links.
