Sunday 19 January 2020

Euro zone economy accelerates, but prices fall more than expected

Michael Noonan greets German Finance Minister Wolfgang Schaeuble in Brussels yesterday
Michael Noonan greets German Finance Minister Wolfgang Schaeuble in Brussels yesterday

The euro zone economy accelerated more than expected in the first quarter, preliminary data showed on Friday, but consumer prices also dropped by more than forecast in April because of a steep fall in energy costs.

The European Union's statistics office Eurostat said gross domestic product in the 19 countries sharing the euro rose 0.6 percent quarter-on-quarter in the January-March period, up from 0.3 percent growth in the previous three months.

Economic polled by Reuters had expected quarterly growth of 0.4 percent. On a year-on-year basis, euro zone GDP rose 1.6 percent in the first quarter, beating expectations of a 1.4 percent increase.

Eurostat does not provide a detailed breakdown of the numbers in its first GDP estimate.

Meanwhile, consumer prices fell 0.2 percent year-on-year in April, Eurostat said, after holding flat in March, a steeper drop than the consensus forecast for a 0.1 percent decline.

Falling energy prices, which tumbled 8.6 percent year-on-year in April, were the main drag on the overall index, while unprocessed food was the main positive, rising 1.2 percent.

Without those two most volatile items, in a measure that the European Central Bank calls core inflation -- consumer prices rose 0.8 percent year-on-year in April, less than the 1 percent increase in March.

The ECB wants to keep headline inflation below, but close to 2 percent over the medium term and has been buying government bonds on the market since last year to inject more cash into the economy and make prices grow faster.


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