Euro growth still "solid" in early 2016 despite forecast downgrade

The economy of the eurozone, the embattled currency bloc within the European Union, expanded in early 2016 by slightly less than anticipated last month, but still posted "solid" growth, official data showed on Friday.

The euro area has struggled with feeble growth, low inflation and high unemployment despite emerging from recession three years ago. Its more recent problems include renewed concerns over Greece and the potential fallout from Britain's exit from the eurozone.

Despite those headwinds, in the first three months of the year the gross domestic product (GDP) of the 19 members of the bloc rose by 0.5 per cent compared to the previous quarter, the European Union's statistics agency Eurostat said.

In April, Eurostat had forecast a 0.6-per-cent expansion.

Its updated figure was still far better than the 0.3-per-cent growth recorded in the previous two quarters, and was the best result for the eurozone since the start of 2015.

"Solid growth confirmed despite minor downward revision," British bank Barclays commented in a note to clients, warning however that economic performance was likely to slow down slightly in the rest of 2016.

"There are reasons to expect growth to slow in the second quarter," economic think tank Capital Economics said.

"We have long warned that two key forces which have boosted growth over the last year - the effects of previous falls in oil prices and the euro - would fade in the coming quarters," the British-based outfit added.

Several EU nations released their domestic GDP data Friday, including eurozone powerhouse Germany: its economy posted 0.7-per-cent quarterly growth, one decimal point above economists' expectations, thanks to strong domestic demand.

Data for Italy and Greece was also positive.

Italian GDP was up by 0.3 per cent on the quarter, below the euro average but "nevertheless one of the fastest paces of expansion [...] over the last five years," Loredana Federico of UniCredit bank said.

In Greece, the economy shrank by 0.4 per cent, rather than the forecast 0.7 per cent, leading Morgan Stanley analyst Daniele Antonucci to predict that the country could return to growth "some time in 2016, possibly as soon as the latter part of the second quarter."

On a yearly basis, GDP in the euro area expanded by 1.5 per cent in the first quarter of 2016, Eurostat said.

Across the entire 28-member bloc, including the nine EU member states which have not adopted the euro currency, GDP rose by 0.5 per cent compared to the previous quarter, and by 1.7 per cent year-on-year.

Britain, the biggest EU economy outside of the euro bloc, posted 0.4 per cent quarterly growth and a 2.1-per-cent expansion in GDP on an annual basis.

Last update: Fri, 24/06/2016 - 08:49
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