Austria: Weak economic growth in 1Q2024, inflation declines
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Slight GDP growth in 1Q24.
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ECB decides on first interest rate cut.
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AT yields expected to fall slightly.
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Weaker dollar expected.
After a recession in 2023, the Austrian economy shows slight signs of recovery in 1Q2024. Nevertheless, we expect only extremely moderate growth in 2024, which should be supported mainly by growing private consumption. Inflation is further declining. This is partly due to pricedampening energy prices, but also to moderately rising food prices. However, inflation in the services sector, supported by wage increases, is likely to keep core inflation on an elevated level and in turn overall inflation is expected to remain above the eurozone average.
At the June meeting, the ECB Governing Council lowered the key interest rates by 25 basis points. The outlook remained the same as at previous meetings and emphasised the meeting-to-meeting approach. Yields on German government bonds have risen from low levels. Yields on 10-year Austrian government bonds have been trading at above-average risk premiums compared to German yields since 2022.
GDP (real,y/y)
Author
Erste Bank Research Team
Erste Bank
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