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France, Italy Boost Eurozone Q1 GDP Growth


Eurozone economic growth improved as expected in the first quarter as growth in France and Spain accelerated and Italy expanded, offsetting the weak performance of Germany.

Gross domestic product of the 19-nation bloc expanded 0.4 percent sequentially in the first quarter, slightly faster than the 0.3 percent growth seen in the fourth quarter of 2014, flash estimates published by Eurostat showed Wednesday.

The growth rate matched economists' expectations. A similar rate was last seen in the second quarter of 2013. The decline in oil prices, weak euro and European Central Bank's stimulus underpinned the recovery.

Year-on-year, economic growth improved to 1 percent, in line with economists' forecast, from 0.9 percent in the fourth quarter.

Although the breakdown of Eurozone GDP is not available, it is evident that improved growth was due to strengthened domestic demand, IHS Global Insight economist Howard Archer said.

Improved Eurozone growth and April's exit from deflation will not cause any change in the ECB's quantitative easing program, Archer said. The central bank will also see ongoing QE as important to lifting Eurozone inflation expectations further.

The European Commission said in its Spring Forecast that growth in the European Union is benefiting from positive economic tailwinds. Eurozone is forecast to grow 1.5 percent this year and 1.9 percent in 2016.

Unlike in the fourth quarter, overall improvement in the currency bloc was driven by France, Spain and Italy, while weak trade weighed on German growth.

Germany's economic growth slowed in the first quarter of the year to 0.3 percent from 0.7 percent. Meanwhile, the French economy expanded 0.6 percent, the most since the second quarter of 2013.

Spain's economic growth accelerated to 0.9 percent from 0.7 percent. Italy expanded for the first time in six quarters exiting recession. The economy expanded 0.3 percent, the fastest since the first quarter of 2011.

Elsewhere, growth in Portugal remained unchanged at 0.4 percent. Austria's economy grew 0.1 percent after staying flat in the previous few quarters. At the same time, the neighboring Slovakia's growth improved to 0.8 percent from 0.7 percent.

Belgium's GDP grew 0.3 percent, while Estonia contracted 0.3 percent. Growth in the Netherlands halved to 0.4 percent from 0.8 percent.

Cyprus moved out of recession strongly with GDP rising by 1.6 percent, while Finland entered a technical recession. Finnish GDP fell 0.1 percent in the first quarter and 0.2 percent in the prior quarter.

The youngest Eurozone country Lithuania shrank 0.6 percent, partially offsetting prior quarter's 0.7 percent rise. Lithuania became the 19th member of Eurozone on January 1.

Latvia, which joined Eurozone in 2014, grew at a slightly slower pace of 0.4 percent after growing 0.5 percent.

The Greek economy slipped back into recession in the first quarter of the year as the lingering political crisis hurt the fragile recovery. GDP declined 0.2 percent from the fourth quarter when it fell 0.4 percent.

With signs that the Greek crisis is starting to constrain the recovery, the euro-zone's out performance is likely to be short-lived, Jonathan Loynes, chief European economist at Capital Economics, said.

In the EU28, GDP advanced 0.4 percent from the fourth quarter and 1.4 percent from the same period of last year.

by RTT Staff Writer

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