Eurozone economy grows at fastest rate in nearly two years
The Eurozone economy grew at its fastest rate for nearly two years during the first three months of 2015 thanks to a raft of favourable conditions such as the sharp fall in oil prices, official figures showed Wednesday.
The 0.4 per cent quarterly increase in economic output across the 19-country bloc was up from the 0.3 per cent recorded in the previous quarter and in line with expectations. It matches the rate recorded when the Eurozone emerged from its longest-ever recession in the second quarter of 2013.
Still, the rate is likely to be a slight disappointment to many policymakers across the region considering the beneficial backdrop for the Eurozone economy. The bloc has enjoyed a series of tailwinds such as a fall in oil prices, which acts like a tax cut for businesses and consumers, and the export-boosting drop in the value of the euro. To cap it all off, the European Central Bank launched its long-awaited €1.1-trillion (US$1.2-trillion) monetary stimulus to keep a lid on interest rates in the markets.
The ECB is buying €60 billion per month in government and corporate bonds using newly created money. Increasing the supply of money in the economy can raise inflation. The stimulus is also lowering market borrowing rates, which tends to boost lending and, by extension, economic activity. And it is pushing down the value of the euro, giving European exporters a price edge in world markets.
ECB President Mario Draghi said Thursday that the bond-buying programme is working and would continue.
The overall growth figure also masks some disappointments in specific countries, such as Greece's return to recession.
Greece, which is in the midst of protracted bailout talks with creditors that may see it leaving the euro, saw its economy shrink by 0.2 per cent in the first three months. Following the 0.4 per cent contraction in the last quarter of 2014, Greece is now technically back in recession barely a year after it emerged from a downturn as severe as the Great Depression.
Another disappointment was Germany, Europe's largest economy, which saw its quarterly growth rate decline to 0.3 per cent from 0.7 per cent.
Positive surprises came from France, which saw growth of 0.6 per cent against a flat outcome in the last quarter of 2014, and Italy, which grew 0.3 per cent, its first increase since the third quarter of 2014. Perhaps the most notable increase was in Spain, which saw output expand by a robust 0.9 per cent.