-- The euro area economy slowed in the first quarter, while annual inflation accelerated in April on the back of surging energy costs, preliminary data showed Thursday.
The eurozone's monthly gross domestic product ticked up 0.1% in the first quarter, against the prior three-month period gain and market forecast of 0.2%, according to Eurostat's flash data. On an annual basis, the economy expanded 0.8%, down from the previous quarter's growth rate of 1.3% and an expected 0.9% gain.
Data released earlier on Thursday showed that French GDP stalled in the first quarter after a 0.2% uptick in the previous three-month period, missing analyst expectations of continued 0.2% growth. In contrast, data from Spain showed that the national economy continued to expand, though growth eased slightly to 0.6% from 0.8%. Meanwhile, Germany's GDP edged up to 0.3% from 0.2% in the prior quarter, beating consensus estimates of a 0.1% uptick.
In terms of inflation, the consumer price index in the euro area climbed 3% year over year in April, in line with consensus and compared with 2.6% in March. On a monthly basis, consumer prices came in 1% higher.
Energy prices emerged as the primary driver of April inflation, with the annual rate more than doubling to 10.9% from March's 5.1%. Elsewhere, services inflation slowed, while the increase in food, alcohol, and tobacco prices, as well as non-energy industrial goods, edged slightly higher.
Excluding energy, food, alcohol and tobacco, inflation was 2.2% in April, coming in slightly below both the previous month's reading and market forecast of 2.3%.
On the labor front, the seasonally adjusted unemployment rate in the euro area stood at 6.2% in March, down from the revised 6.3% in February. The latest reading is consistent with the market forecast.
Against this backdrop, the ECB is anticipated to hold the deposit rate steady at 2% during Thursday's meeting. In a preview report published April 24, Danske Bank expects the market to focus on future policy cues.
"With an unchanged decision in April all focus during the meeting will be on signals, and we expect Lagarde to leave the door open for summer hikes in order to keep inflation expectations anchored. The ECB is likely broadly satisfied with the current market pricing of 65 [basis points] worth of hikes this year. Although we do see room for market pricing falling slightly as most recent communication from the ECB's [Governing Council] members has increasingly mentioned deteriorating growth prospects from higher energy prices. For this reason and given the extraordinary uncertainty about the economic outlook, we do not expect any pre-commitments to summer hikes," Danske Bank wrote.