Eurozone Economy Speeds up En-route to Recovery

The official statistics state that the eurozone’s economy grew by a faster-than-expected 0.6% in the first three months of the year.

The growth was above analysts’ expectations 0.4% and from the 0.3% rate recorded in the previous quarter the growth rate in the 19-nation bloc doubled.

Deflation had returned to the eurozone, indicated separate data from Eurostat.

Inflation in the bloc fell to minus 0.2% in April, down from zero in March.

Eurozone’s unemployment rate fell to 10.2% in March – the lowest rate for four-and-a-half years, according to data from other Eurostat figures.

The eurozone’s economy is now bigger than it was before the start of the financial crisis eight years ago, suggests the latest growth figures.

The eurozone should be able to sustain a growth rate of about 0.4% quarter-on-quarter in the future, but warned the rate could ease in the three months to June, said Howard Archer, economist at IHS Global Insight.

“Global economic uncertainties and problems are still a handicap for eurozone growth, not only through limiting exports but also through weighing down on business and consumer confidence,” he said.

“The risk of recurrent terrorist attacks and the possibility of the UK voting to leave the EU in June’s referendum are also uncertainties that could impact on eurozone growth,” he added.

Energy prices fell 8.6% year-on-year in April, while unprocessed food prices rose 1.2%, shows the inflation figures. The core inflation rate showed consumer prices rose 0.8% year-on-year in April – less than a 1% increase in March. The European Central Bank’s target is to keep the headline inflation close to, but below, 2%.

In an attempt to drive growth in the eurozone and push up inflation, in March, the ECB cut interest rates further and expanded its bond-buying stimulus programme.

However experts are  of the opinion that the falling energy prices are keeping inflation very low for sure, but that was not what made the headline figure slip below zero once again.

Energy price falls actually slowed slightly. The key factor was a dip in services inflation to just 1%. However when compared to what the European Central Bank has set its inflation target of below but close to 2%. It is a slow recovery, say experts.

As far as the ECB is concerned, experts say, that the gap between the data and the target is too wide for the ECB’s liking. There are economic costs when prices rise too slowly is what the ECB believes in, ay experts.

Some economists are saying that with luck the drop into negative territory might be a consequence of the early Easter. The impact of oil price falls will stop dragging overall inflation down at some point in time n the near future.

Still, the figures are a telling reminder of how the ECB is struggling to achieve its objective.

(Adapted from bbc.com)

 

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Categories: Economy & Finance, Uncategorized

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