Euro zone economy
outperforms U.S. with robust start to year
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[May 03, 2017]
By Francesco Guarascio and Philip Blenkinsop
(Reuters) - The euro zone economy started the year with robust growth
that outstripped that of the United States and set the stage for a
strong 2017, preliminary estimates showed on Wednesday.
The improving economy may weaken the euroskeptic parties that have
gained ground in several European Union states over the past years, many
of which have denounced the poor state of their economies and called for
ditching the euro and returning to national currencies.
The gross domestic product of the 19-country euro zone bloc grew by 0.5
percent on the quarter in the first quarter, which translates to
annualized growth of 1.8 percent in all of 2017, the European statistics
agency Eurostat said.
The preliminary euro zone figure is much higher than the 0.7 percent
annualized growth recorded in the United States in the same quarter, the
weakest performance since the first quarter of 2014, according to U.S.
The weaker performance of the U.S. economy was a blow for the
administration of Donald Trump, who has promised strong growth with a
The contrasting data from the U.S. and the euro zone may weaken the
French presidential candidate Marine Le Pen, who is calling for tariff
barriers to protect the French economy. She faces free-trade supporter
Emmanuel Macron in a May 7 runoff, which polls show Macron is likely to
In a further sign of a healthier recovery of the euro zone, Eurostat
raised to 0.5 percent from 0.4 percent its figures on growth in the
fourth quarter of 2016. The year-on-year estimate for the last quarter
was also revised up, to 1.8 percent from the previous 1.7 percent.
Political risks, however, still represent a possible drag on euro zone
"The economy is proving to be resilient to uncertainty both abroad and
at home. Bar a surprise at the French elections on Sunday, euro zone
growth is set for a strong 2017," warned Bert Colijn, senior economist
Euroskeptic parties are also on the rise in Italy, the euro zone's
third-largest economy, which may hold general elections in the coming
months. No date is set, but they would come no later than next May.
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File photo of the skyline of the banking district in Frankfurt,
September 18, 2014. REUTERS/Kai Pfaffenbach /Files
Eurostat did not break down the components of the GDP growth, but economists
expected it was led mostly by domestic consumption and business investment.
Weaker domestic demand might reduce the pace of the expansion in the coming
quarters as consumer prices rise.
remains the possibility that growth could be hampered by consumers being more
reluctant to spend as their purchasing power is squeezed by overall higher
inflation and limited wage growth in most countries," Howard Archer, chief
European economist at IHS Markit said.
First estimates released in April show inflation in the 19-country currency bloc
was 1.9 percent year-on-year in April, up from 1.5 percent in March and just
short of the four-year high of 2.0 percent recorded in February.
But euro zone inflation figures continue to fluctuate. Data on industrial
producer prices, also released by Eurostat on Wednesday, showed a marked
slowdown in March.
Producer prices fell 0.3 percent in March and year-on-year growth slowed to 3.9
percent from February's 4.5 percent, which was the highest in more than five
"It seems that the slowdown in producer price inflation largely reflected energy
effects, which should continue to bear down on producer and consumer price
inflation over the rest of the year," said Jack Allen, European economist at
Capital Economics, noting that the ambivalent figures are likely to leave the
European Central Bank's stimulus program unchanged this year.
(Reporting by Francesco Guarascio @fraguarascio and Philip Blenkinsop, editing
by Larry King)
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