Eurozone surprises as GDP growth doubles to 0.6%


Eurozone GDP growth has surprised analysts by doubling quarter-on-quarter to 0.6 per cent, despite uncertainty surrounding a potential Brexit and concerns about further terrorist attacks.

GDP growth was 0.3 per cent for both the third and fourth quarters of 2015.

Unemployment also fell 226,000 in March taking the unemployment rate down to 10.2 per cent, the lowest since 2011.

Growth was boosted by French GDP rising 0.5 per cent in Q1, up from 0.3 per cent in the previous quarter – partially attributed to a correction following Paris’s November terror attacks.

The risk of further terror attacks could hit further Eurozone growth, says Howard Archer, chief UK and European economist at IHS Global Insight. Belgium, which suffered attacks on its airport and metro in March, saw GDP growth of 0.2 per cent in Q1, compared to 0.5 per cent in Q4 last year.

Global uncertainty and the potential for Britain to vote to leave the EU when it goes to the ballot box in June are other factors that may soften the Eurozone’s GDP growth over the rest of 2016, Archer says.

He predicts German growth will have doubled when it releases its GDP figures for the quarter.

Spanish GDP held up at 0.8 per cent, despite a six-month political stalemate, which will see the country return to the polls in June after its December elections failed to deliver an outcome.

Business investment was healthy in France and Austria.

Despite the positive figures, Archer predicts the Eurozone will not be able to maintain this level of growth in Q2. The research firm forecast 2016 GDP growth to total 1.6 per cent.

“The ECB will certainly be encouraged by the marked first quarter pick-up in Eurozone GDP growth, and will no doubt argue that it shows its monetary policy is working,” he says, adding that fiscal stimulus would increasingly kick in over the coming months.