The eurozone’s economy picked up at the start of the year, reversing the sharp slowdown of the second half of last year and raising economists’ hopes that the worst may be over.
In the first quarter of 2019 gross domestic product growth accelerated to 0.4 per cent, according to a flash estimate from Eurostat, the European Commission’s statistics bureau, up from 0.2 per cent in the fourth quarter of 2018. The growth acceleration beat economists’ expectations; a Reuters poll found that they had anticipated a 0.3 per cent eurozone expansion.
Italy has emerged from recession, the figures showed, with quarter-on-quarter growth of 0.2 per cent, buoyed by net exports in particular. France’s GDP expanded at a healthy 0.3 per cent in the first quarter of this year, supported by strong household consumption, while Spain’s quarter-on-quarter growth was better than expected at 0.7 per cent. The eurozone figure implies improvements in German GDP data, which has not yet been released, leading Capital Economics to forecast that the figures will show an increase of 0.4 per cent.
The eurozone’s surprise improvement is the third positive economic reading among large global economies this month, after both Chinese and US GDP outperformed economists’ expectations, and it came despite various survey data portraying a grimmer picture.
The improvement is good news for the European Central Bank after it revised the region’s growth forecast sharply downwards in March.
The ECB will publish its new assessment on the eurozone’s economic outlook in June, when it is also expected to reveal the details of a new phase of subsided lending to banks, known as targeted longer-term refinancing operations or TLTROs.
However external uncertainties persist, including Brexit and trade disputes, which continue to weigh on the currency area’s growth outlook and on the ECB’s monetary policy decisions.
