Euro-zone eco­nomic growth rate un­ex­pect­edly dou­bles

Business Mirror - - REPORTS -

THE euro-zone econ­omy has fi­nally re­couped all the ground lost in the re­ces­sions of the past eight years, af­ter of­fi­cial fig­ures on Fri­day, showed that the 19-coun­try sin­gle cur­rency bloc ex­panded by a quar­terly rate of 0.6 per­cent in the first three months of the year.

The scale of the in­crease re­ported by Euro­stat in a pre­lim­i­nary es­ti­mate was un­ex­pected— the con­sen­sus in the mar­kets was for a more mod­est rise to 0.4 per­cent, from the pre­vi­ous quar­ter’s 0.3 per­cent.

Euro­stat said the in­crease means that the euro- zone econ­omy is now 0.4 per­cent big­ger than it was in the first quar­ter of 2008, be­fore the deep re­ces­sion stoked by the global fi­nan­cial cri­sis.

Since then, the euro zone has had a tor­rid time, fall­ing in and out of re­ces­sion, as the global fi­nan­cial cri­sis mor­phed into a debt cri­sis that at var­i­ous times has threat­ened the fu­ture of the euro cur­rency it­self.

The euro­zone’s re­cov­ery of the ground lost over the past few years has lagged other ma­jor economies, in­clud­ing the United States, by years.

Still, it’s a sig­nal that the euro zone’s 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 cen­tered 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 per­cent in March from the pre­vi­ous month’s 10.4 per­cent, bring­ing it to its low­est since Au­gust 2011.

Though these f ig­ures are en­cour­ag­ing, the euro zone re­mains aff licted by low inf la­tion. Euro­stat said in a sep­a­rate re­port that con­sumer prices in the year to April fell by 0.2 per­cent. That’s down from the pre­vi­ous month’s an­nual rate of zero and be­low mar­ket ex­pec­ta­tions for a more mod­est de­cline to mi­nus 0.1 per­cent. The core rate, which strips out the volatile items of food, al­co­hol, to­bacco and en­ergy, also de­clined to 0.8 per­cent, from 1 per­cent.

Given that the Euro­pean Cen­tral Bank’s ( ECB) pri­mary pol­icy pur­pose is to keep in­fla­tion just be­low 2 per­cent, 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 to be less likely to en­act a fur­ther stim­u­lus, the in­fla­tion data coun­tered that in­stinct. The euro was un­changed at $1.1380 fol­low­ing the data.

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