In a preliminary estimate, Eurostat says the eurozone is now 0.4 per cent bigger than in the first quarter of 2008, just before the recession associated with the global financial crisis. The government’s growth target of 1.5 percent for the full year now looks within reach, barring a sharp slowdown for the remainder of the year.
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“False dawns have been common since the financial crisis and nowhere more so than in Europe”, cautioned Alasdair Cavalla, senior economist at the Centre for Economics and Business Research.
Economists expect this morning’s report to show the economy contracted by somewhere between 0.1 and 0.4 per cent, after having surged in January.
Though the growth and unemployment figures are on the right path, the lack of inflation remains a problem.
Upon joining OANDA in 2007, he established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends.
As a result, the market reaction to Friday’s economic data was muted.
He added that policymakers are more likely to sit and wait to assess the impact of their stimulus measures, such as quantitative easing and negative interest rates, before taking further action to boost inflation.
Meanwhile, consumer prices fell 0.2 percent year-on-year in April, Eurostat said, after holding flat in March, a steeper drop than the consensus forecast for a 0.1 percent decline.
Ahead of these data, the euro traded mixed against its major rivals.
Deflation is bad for an economy because consumers might withhold purchases in anticipation of further falling prices, thus reducing investment by businesses and driving up unemployment.
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The eurozone’s last recession ended almost three years ago, but growth has been slow.
