Eurozone growth strengthens in first quarter

BRUSSELS - Agence France-Presse

Reuters Photo

Growth in the eurozone strengthened to 0.4 percent in the first quarter, official EU data showed on May 13, with a surprising performance by France where the economy exceeded powerhouse Germany’s.

The official Eurostat agency’s first estimate for the January-March period in the 19-nation eurozone was in line with analyst expectations, and was up from 0.3 percent growth in the fourth quarter of 2014.

The eurozone has “benefitted from sharply lower oil prices, a weakened euro and increasing ECB stimulus,” said Howard Archer, Chief European Economist at IHS Global Insight.

“All of the major eurozone economies saw improved economic performances in the first quarter except for Germany,” he said.

Growth slowed in Germany, Europe’s biggest economy, to 0.3 percent in the first quarter of 2015.

German GDP growth was “good but not good enough,” said ING DiBa economist Carsten Brzeski.
 
“The German economy continued on its growth path, but at a slightly slower momentum” in the first quarter, Destatis said.     

The main growth driver was domestic demand, with both private households and the public sector increasing spending. Investment also increased, particularly in construction and equipment, exports increased slightly and imports rose more strongly.     

On a 12-month comparison, GDP grew by 1.1 percent in the January-March period compared with the same three months a year earlier, Destatis said.    

The German economy was continuing to benefit from earlier structural reforms and was being given extra tailwind by the European Central Bank’s monetary policy measures, Brzeski argued.

At the same time, French growth picked up to a vigorous 0.6 percent from zero growth at the end of last year.

“Our growth perspectives for 2015 are today clearly comforting,” said French Finance Minister Michel Sapin.    
The Italian economy edged its way further out of recession with stronger than expected 0.3 percent growth in the first quarter which followed zero growth in the previous three month period.

The news was far bleaker for debt-hit Greece where the economy fell back into recession with a contraction of minus 0.2 percent amid four months of deadlock in bailout talks between the radical Syriza-led government and its EU-IMF creditors.

The eurozone’s northern-most nation Finland also sank into recession, contracting by 0.1 percent after losing 0.2 percent of its GDP in the fourth quarter last year.

“Growth is clearly broadening across the Eurozone. That said, the jury is still out whether eurozone growth has reached enough escape velocity to see a self-sustained recovery,” said Peter Vanden Houte, of ING investment bank.

Across all the 28 countries of the European Union, growth also hit 0.4 percent, the same as the previous quarter.