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Euro Zone Economy Grows More Slowly Than Expected Euro Zone Economy Grows More Slowly Than Expected
(about 7 hours later)
PARIS — The European economy maintained its feeble overall growth in the first three months of the year, official data showed on Thursday, as relatively strong performances by Germany and Britain were offset by continued weakness in France and a step backward by Italy.PARIS — The European economy maintained its feeble overall growth in the first three months of the year, official data showed on Thursday, as relatively strong performances by Germany and Britain were offset by continued weakness in France and a step backward by Italy.
Gross domestic product in the 18 nations that share the euro currency rose 0.2 percent from an identical increase in the previous quarter, which translates to an annual growth rate of 0.8 percent, Eurostat, the union’s statistics agency, reported from Luxembourg. For the overall 28-member union, G.D.P. grew 0.3 percent, for an annualized rate of 1.3 percent.Gross domestic product in the 18 nations that share the euro currency rose 0.2 percent from an identical increase in the previous quarter, which translates to an annual growth rate of 0.8 percent, Eurostat, the union’s statistics agency, reported from Luxembourg. For the overall 28-member union, G.D.P. grew 0.3 percent, for an annualized rate of 1.3 percent.
Germany’s economy grew at a relatively robust 0.8 percent from the previous quarter, once again driving the euro zone forward; Britain, which is not a member of the single currency bloc, also grew 0.8 percent. But the French economy stagnated, and Italy’s declined 0.1 percent. That was a reversal for the Italian economy, which in the previous quarter had registered growth of 0.1 percent.Germany’s economy grew at a relatively robust 0.8 percent from the previous quarter, once again driving the euro zone forward; Britain, which is not a member of the single currency bloc, also grew 0.8 percent. But the French economy stagnated, and Italy’s declined 0.1 percent. That was a reversal for the Italian economy, which in the previous quarter had registered growth of 0.1 percent.
The euro zone’s quarterly growth was only half the 0.4 percent that economists had been anticipating.The euro zone’s quarterly growth was only half the 0.4 percent that economists had been anticipating.
“There was a huge divergence between the region’s economies,” Jennifer McKeown, an economist in London with Capital Economics, wrote in a research note. But even the German growth figure was slightly misleading, she wrote, as it reflected a rebound from an earlier period when poor weather depressed output.“There was a huge divergence between the region’s economies,” Jennifer McKeown, an economist in London with Capital Economics, wrote in a research note. But even the German growth figure was slightly misleading, she wrote, as it reflected a rebound from an earlier period when poor weather depressed output.
The current pace of growth in Europe “will do little to erode spare capacity or reduce deflation risks,” she added.The current pace of growth in Europe “will do little to erode spare capacity or reduce deflation risks,” she added.
While the initial estimate on Thursday is subject to revision, it does put Europe’s pace of growth ahead of the United States for the first time in several years. The American economy was slowed by unusually cold, wintry weather, and grew at an annual rate of just 0.1 percent in the January-March period, the Commerce Department reported on April 30; many economists expect the figure for the United States to be revised in the months ahead to show a decline.While the initial estimate on Thursday is subject to revision, it does put Europe’s pace of growth ahead of the United States for the first time in several years. The American economy was slowed by unusually cold, wintry weather, and grew at an annual rate of just 0.1 percent in the January-March period, the Commerce Department reported on April 30; many economists expect the figure for the United States to be revised in the months ahead to show a decline.
Japan, where the government of Prime Minister Shinzo Abe has bet that a vigorous program of monetary expansion and reform will restart the economy, on Thursday reported that first-quarter G.D.P. growth rose 5.9 percent at an annualized rate. A surge in consumer spending before a rise in sales taxes contributed to the gain.Japan, where the government of Prime Minister Shinzo Abe has bet that a vigorous program of monetary expansion and reform will restart the economy, on Thursday reported that first-quarter G.D.P. growth rose 5.9 percent at an annualized rate. A surge in consumer spending before a rise in sales taxes contributed to the gain.
Financial markets greeted the news tranquilly, with the euro down slightly at $1.3658 and major European stock indexes little changed.Financial markets greeted the news tranquilly, with the euro down slightly at $1.3658 and major European stock indexes little changed.
The Eurostat data showed that the economies of Italy, the Netherlands, Portugal and Estonia all contracted again after growing slightly in the final three months of last year. The Eurostat data showed that the economies of Italy, Estonia, the Netherlands and Portugal all contracted again after growing slightly in the final three months of last year.
Eurostat also reported final April inflation data for the euro zone, showing consumer prices rising just 0.7 percent from a year earlier, ticking up marginally from March’s rate of 0.5 percent.Eurostat also reported final April inflation data for the euro zone, showing consumer prices rising just 0.7 percent from a year earlier, ticking up marginally from March’s rate of 0.5 percent.
The combination of low inflation — “lowflation,” as some analysts call it — and weak growth has raised concerns that the euro bloc could tip into outright deflation, further enfeebling the economy and increasing the stress on struggling borrowers and lenders.The combination of low inflation — “lowflation,” as some analysts call it — and weak growth has raised concerns that the euro bloc could tip into outright deflation, further enfeebling the economy and increasing the stress on struggling borrowers and lenders.
The data released on Thursday confirmed that six nations — Greece, Bulgaria, Cyprus, Hungary, Slovakia and Portugal — were already experiencing declining prices. The data released on Thursday confirmed that six nations — Greece, Bulgaria, Cyprus, Hungary, Portugal and Slovakia — were already experiencing declining prices.
Carsten Brzeski, an economist at ING in Brussels, said the data on growth and inflation would complicate life for the European Central Bank, which probably “would not be unhappy with some downward revisions to growth and inflation” as a means of justifying more aggressive monetary policy.Carsten Brzeski, an economist at ING in Brussels, said the data on growth and inflation would complicate life for the European Central Bank, which probably “would not be unhappy with some downward revisions to growth and inflation” as a means of justifying more aggressive monetary policy.
The president of the central bank, Mario Draghi, has “put the E.C.B. into a corner from which it will be very hard to escape without new action,” Mr. Brzeski said.The president of the central bank, Mario Draghi, has “put the E.C.B. into a corner from which it will be very hard to escape without new action,” Mr. Brzeski said.
Without signs of a solid improvement in growth and inflation, which would be “a rather unlikely scenario,” Mr. Brzeski said, the central bank at its policy meeting next month would almost certainly have to take steps to stimulate the economy.Without signs of a solid improvement in growth and inflation, which would be “a rather unlikely scenario,” Mr. Brzeski said, the central bank at its policy meeting next month would almost certainly have to take steps to stimulate the economy.
With the European Central Bank’s key interest rates already very low, there is not much scope left to employ rate cuts, the traditional monetary tool for bolstering growth and raising prices. But Mr. Draghi and other top central bank officials have been strongly hinting that they are prepared to use unconventional policy measures, as soon as next month, and economists believe such measures could include a new round of cheap loans to banks in the hopes that lenders pass credit on to the real economy. With the European Central Bank’s key interest rates already very low, there is not much scope left to employ rate cuts, the traditional monetary tool for bolstering growth and raising prices. But Mr. Draghi and other top central bank officials have been strongly signaling that they are prepared to use unconventional policy measures, as soon as next month, and economists believe such measures could include a new round of cheap loans to banks in the hopes that lenders pass credit on to the real economy.
But the central bank is thought unlikely to reach for the so-called “quantitative easing” measures — large-scale purchases of government bonds — that other central banks, including the Federal Reserve in the United States, have adopted. But the central bank is thought unlikely to reach for the so-called quantitative easing measures — large-scale purchases of government bonds — that other central banks, including the Federal Reserve in the United States, have adopted.