Eurozone GDP slows in Q1 after strong 2017

7 years ago - Published in Finance

Economic growth in the 19 countries sharing the euro currency slowed as expected at the start of 2018, EU statistics agency Eurostat said in its preliminary flash estimate.

Eurostat estimated on Wednesday that quarterly growth in the 19 member single currency area slipped to 0.4 per cent in the three months to March, down from the 0.7 per cent expansion rate in the final quarter of last year and the weakest expansion rate since the middle of 2016.

This was in line with economists’ forecasts, but well below the 0.7 percent quarterly rises seen in the previous three quarters.

However, it was unlikely to rebound to the 2.5 percent expansion seen in 2017.

Eurostat provided no explanations for the slowdown, but it was in line with economists’ expectations following a run of soft activity data attributed partly to temporary factors such as the bad weather gripping Europe in March, the acute volatility in stock markets, strikes and even a particularly nasty outbreak of flu in Germany.

However, there are some longer-term concerns such as the euro’s relative strength that may keep a lid on growth in the months to come — a higher euro can make the region’s exports more expensive in international markets. Another potential headache could come in the shape of a trade war with the U.S. if President Donald Trump goes ahead with his plan to impose a series of tariffs.

Separately, Eurostat said unemployment across the region held steady at a near 10-year low of 8.5 percent in March. Overall there were 13.82 million people out of work in the eurozone, down by 83,000 on the month before.

The decline in unemployment has accelerated over the past year as the region’s recovery has gained momentum across sectors and across countries — In 2017, the eurozone was one of the standouts of the global economy, growing by 2.5 percent, its highest level since 2007.

The region has benefited from waning fears over debt-ridden Greece and the defeat of a run of populist — and anti-euro — politicians in elections in France and the Netherlands.

GDP estimates from Germany, the eurozone’s largest economy, have not yet been released.

But France’s statistics agency has reported a Q1 growth decline from 0.7 per cent to 0.3 per cent. And growth in Spain was estimated to be unchanged at 0.7 per cent.