Eurozone’s Economy Defies Expectations: Growth above Pre-Crisis Peak Levels

Written by | Monday, May 2nd, 2016
@Eubulletin

In the first quarter of 2016, the European Union grew at its fastest pace in five years, driven by unexpected growth rates in France and Spain. Having taken eight years to recover, the continent is now at a better shape than at its peak before the financial crisis. The unlikely results were achieved despite the possibility that the United Kingdom might leave the EU as the Eurozone growth doubled compared to the previous quarter, outperforming even the most optimistic expectations on household consumption and rebound in investments. However, despite these promising results, in April, the Eurozone slipped back into deflation.

Despite the positive news, some analysts warn that this might be just a blip, as Europe is weighted down by high debt coupled with high unemployment, weak bank profits and substantial excess capacity in its economy. Nevertheless, the Eurozone growth soared by 0.6 percent between January and March, higher than the expectations of 0.4 percent and ahead of Britain’s 0.4 percent. At the same time, the US economy grew 0.5 percent on an annualized basis in the first quarter. Eurozone’s annual growth was steady at 1.6 percent, which is more than three times the US rate in the same period.

In general, the figures defied expectations for a slowdown as they reflected plunging energy costs, a continuous fall in joblessness as well as a rising spending. “The first months of the year were tumultuous with large stock market declines, growth concerns in the US, China and many emerging markets and plummeting confidence among businesses and consumers,” ING economist Bert Colijn commented. He added that “domestic strength in the Eurozone economy is key to current economic growth,” which is mostly thanks to the improvements in the job market.

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