Eurozone grows by 0.6 per cent in first quarter - faster than US and UK

 
Jake Cordell
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The European Central Bank (ECB) will take today's figures as justification for its monetary policy package
The European Central Bank (ECB) will take today's figures as justification for its monetary policy package (Source: Getty)

The Eurozone expanded at its fastest pace in a year during the first quarter of 2016, even as the single currency bloc fell back into deflation, allaying fears of secular stagnation across the continent.

GDP grew by 0.6 per cent in the first three months of the year - faster than both the United States and the United Kingdom which posted figures earlier this week.

Growth was comfortably ahead of expectations in what one analyst called a "major upward surprise" after strong data from France and Spain earlier this morning showed their economies surging back into life.

France's economy grew by 0.5 per cent between January and March - nearly twice as fast as the expectations of just 0.3 per cent.

Jobs up, prices down

The unemployment rate in the Eurozone also came down - falling from 10.4 per cent in February to 10.2 per cent in March.

Despite this, the region is not out of the woods yet, after it fell back into deflation in March, as the consumer prices index (CPI) measure of inflation came in at minus 0.2 per cent.

After stripping out volatile energy prices, so-called "core inflation" also dropped across the bloc, coming in at 0.8 per cent, compared to one per cent in February.

Mike Bell, global market strategist at JP Morgan, said:

The fall in Eurozone core inflation to 0.8 inflation will be unwelcome news for the European Central Bank (ECB) and keeps alive the possibility of further stimulus later this year.

On the other hand, better than expected GDP growth, expanding at 1.6 per cent year-on-year and a continuation in the trend of falling unemployment show that the Eurozone economy continues to improve.

Germany - the Eurozone's largest and most important economy - will post official figures next week, but today's stats suggest that it grew at an impressive pace.

In the UK, the economy expanded by 0.4 per cent in the first three months of the year and economists predicted this could fall even further in the second quarter. The US grew by just 0.5 per cent on an annualised basis.

Strong growth will be highlighted by some as vindication of the European Central Bank (ECB)'s experimental monetary policy which has seen it cut interest rates to minus 0.4 per cent in a bid to spur lending and inflation across the bloc.

Mario Draghi, president of the ECB, has consistently said that his policies will take time to have any effect. Today's data suggest he might be on to something, though the fall in inflation could raise concerns for the central banker dubbed "Super Mario".

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