Tuesday 6 December 2016

Eurozone growth rate unexpectedly doubles to 0.6%

Published 29/04/2016 | 10:16

The eurozone has finally clawed back the ground lost during the recessions it has suffered since 2008
The eurozone has finally clawed back the ground lost during the recessions it has suffered since 2008

The eurozone economy grew by a quarterly rate of 0.6% in the first three months of year, official figures show.

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The increase means the currency bloc has finally clawed back the ground lost during the recessions it has suffered since 2008.

In a preliminary estimate, Eurostat said the eurozone is now 0.4% bigger than in the first quarter of 2008, just before the recession associated with the global financial crisis.

The eurozone has suffered a torrid time since then, falling in and out of recession.

The doubling in the growth rate compared with the fourth quarter was unexpected. The consensus in markets was for a modest rise to 0.4%.

Eurostat also said that inflation in the year to April dropped to minus 0.2% from zero in March.

The eurozone's recovery of the ground lost over the past few years has lagged behind other major economies, including the US, by years.

Still, it is a signal that the eurozone is finally gaining some economic momentum.

The first-quarter rise came in spite of concerns stoked by the huge volatility in financial markets in the first couple of months of the year that centred on worries over the Chinese economic outlook and the sharp fall in the price of oil.

In a further positive development, Eurostat reported that the unemployment rate across the region fell to 10.2% in March from the previous month's 10.4%, bringing it to its lowest since August 2011.

Though these figures are encouraging, the eurozone remains afflicted by low inflation.

The drop in the inflation rate was below market expectations for a more modest decline to minus 0.1%.

The core rate, which strips out the volatile items of food, alcohol, tobacco and energy, also declined to 0.8% from 1%.

Given that the European Central Bank's (ECB) primary policy purpose is to keep inflation just below 2%, the market reaction to the raft of economic data was muted.

While the growth and unemployment figures may have encouraged traders to think that the ECB will be less likely to enact a further stimulus, the inflation data countered that instinct.

Press Association

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