Archive for May 14, 2015

Is the Eurozone Finally Recovering?

It seems like years since we had some genuinely positive news about the eurozone’s economic outlook.  So for many the news that the economy of the eurozone has grown by 0.4% in the first three months of the year was well over due.  The official figures show that the recovery is beginning to speed up slightly, although many forecasters had been predicting a slightly larger rise than this.

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The trend is encouraging though with this fastest quarter growth results for a couple of years.  The growth is still slow but it’s looking sustainable and showing the possibility that it may increase.

There were other figures released before then which are of interest to eurozone economists.  Germany’s economic growth was actually below the average at 0.3%, which represents a significant slow down from the previous 0.7% growth figure for the last quarter of 2014.   The positive signs in the German economy in the areas of private consumption and investment in construction which both rose, were countered by a surprising fall in German exports.

Inflation in Germany is under control and is under the current ECB target of 2% or under.  Most European countries have fairly well controlled inflation in fact the concerns are usually around the level being too low.  An interesting economic documentary covered the risks of deflation, you can still catch the programme on the BBC iPlayer application although you’ll need to connect through a UK proxy to view it.

One of the bigger surprises was the long awaited improvement of the French recovery.  The economy also hit a two year high for growth with it rising an impressive 0.6%.  There are reports that confidence is returning to the economy with French consumer spending growing by 1.6%, although some of this will be due to the lower oil prices and the relatively weak euro rate.  Industrial production levels are also on the rise, with a four year high being recorded.

Other countries are also fairing better with Italy also recording growth figures, for the first time in several years.  Spain topped the Euro growth charts with a recorded 0.9% improvement in it’s economy, the fastest rate for eight years.

How much of this is a result of external factors like the fall in oil prices and the weak currency is difficult to tell.  There is no doubt that there are several factors which are helping plus the increased level of fiscal stimulus from the European Central Bank. There is little doubt that the majority of this growth is being fuelled by domestic demand which would be similar to the initial recover in the UK economy too.

John Usain