Eurozone growth jumps more than expected

AFP, BRUSSELS:  - Growth in the eurozone strengthened far beyond expectations in the first quarter of 2016, but inflation in Europe remained very low and a source of concern. The recovery in the 19-nation single currency area, for years mired in a debt crisis and low growth, contrasts with disappointing figures in the United States. Analysts said the jump in growth meant the benefits of cheap oil and low borrowing rates were finally making their way to consumers across the eurozone. “Good news from the eurozone: One by one, the pieces are falling into place,” said Holger Schmieding, of Berenberg Bank. “Despite the serious market turbulence in January and February, the eurozone economy started rather well into 2016,” he said. The Eurostat statistics agency said growth in the eurozone accelerated in January to March, to 0.6 percent. This expansion beat expectations for 0.4 per cent growth and was double the level posted in the two previous quarters, putting the eurozone on course to grow by 1.6 per cent year-on-year. It also exceeded the 0.5 per cent posted in the same period in the US. In further positive news, eurozone unemployment in March fell to 10.2 percent, its lowest level since 2011, Eurostat said. “The European Central Bank will certainly be encouraged by the marked first quarter pick-up in eurozone GDP growth, and will no doubt argue that it shows its monetary policy is working,” said Howard Archer, of IHS Global Insight. The ECB has slashed interest rates to zero percent, beefed up its controversial bond-buying and made vast amounts of cheap loans available to banks in a bid to jumpstart inflation and boost the economy.
Sharp declines
On the downside for the ECB, eurozone inflation in April fell back into negative territory, data also showed.
The renewed bout of deflation will feed into accusations that the ECB measures to boost prices are not working.
Eurostat said inflation in April was negative 0.2 percent, compared with a revised zero per cent in March. The eurozone was previously at the negative level in February.
Analysts surveyed by Factset data research company had projected inflation of zero percent.
Fighting deflation—a persistent and debilitating decline in prices that weighs on the economy—has been the ECB’s top priority. But the ECB has received biting criticism in Germany for sparking the rise of political anxiety and populism over the state of the economy.
German savers in particular are angry that the ECB policies are eating into their bank balances.
“Drilling down into the detail it’s not hard to see where most of that decline (in prices) came from with sharp declines in energy prices contributing to all of the decline,” said Michael Hewson, of CMC Markets in London.
“Given the surprise jump in the eurozone GDP numbers it would seem that energy prices... are (also) acting as a fiscal stimulus and helping to support the recovery,” he said.

 

Eurozone growth jumps more than expected

AFP, BRUSSELS: - Growth in the eurozone strengthened far beyond expectations in the first quarter of 2016, but inflation in Europe remained very low and a source of concern. The recovery in the 19-nation single currency area, for years mired in a debt crisis and low growth, contrasts with disappointing figures in the United States. Analysts said the jump in growth meant the benefits of cheap oil and low borrowing rates were finally making their way to consumers across the eurozone. Good news from the eurozone: One by one, the pieces are falling into place, said Holger Schmieding, of Berenberg Bank. Despite the serious market turbulence in January and February, the eurozone economy started rather well into 2016, he said. The Eurostat statistics agency said growth in the eurozone accelerated in January to March, to 0.6 percent. This expansion beat expectations for 0.4 per cent growth and was double the level posted in the two previous quarters, putting the eurozone on course to grow by 1.6 per cent year-on-year. It also exceeded the 0.5 per cent posted in the same period in the US. In further positive news, eurozone unemployment in March fell to 10.2 percent, its lowest level since 2011, Eurostat said. The European Central Bank will certainly be encouraged by the marked first quarter pick-up in eurozone GDP growth, and will no doubt argue that it shows its monetary policy is working, said Howard Archer, of IHS Global Insight. The ECB has slashed interest rates to zero percent, beefed up its controversial bond-buying and made vast amounts of cheap loans available to banks in a bid to jumpstart inflation and boost the economy. Sharp declines On the downside for the ECB, eurozone inflation in April fell back into negative territory, data also showed. The renewed bout of deflation will feed into accusations that the ECB measures to boost prices are not working. Eurostat said inflation in April was negative 0.2 percent, compared with a revised zero per cent in March. The eurozone was previously at the negative level in February. Analysts surveyed by Factset data research company had projected inflation of zero percent. Fighting deflationa persistent and debilitating decline in prices that weighs on the economyhas been the ECBs top priority. But the ECB has received biting criticism in Germany for sparking the rise of political anxiety and populism over the state of the economy. German savers in particular are angry that the ECB policies are eating into their bank balances. Drilling down into the detail its not hard to see where most of that decline (in prices) came from with sharp declines in energy prices contributing to all of the decline, said Michael Hewson, of CMC Markets in London. Given the surprise jump in the eurozone GDP numbers it would seem that energy prices... are (also) acting as a fiscal stimulus and helping to support the recovery, he said.