Put it down in the category of “who would’ve thought it.” New data shows that the battered Eurozone posted stronger economic growth from January through March than did the United States.
Data released Tuesday from Eurostat said that first-quarter growth among the 19 nations that use the euro as their currency was 0.4 percent over the prior three months. That tops the U.S. growth rate in the same period, which shrunk to 0.7 percent for the quarter, after a first estimate of anemic 0.2 percent growth.
That Europe is growing again is good news for the United States, since it counts the region as an important trading partner. Consumer spending is boosting demand in Europe, which is good news for U.S. companies operating in the region.
However, the strengthening U.S. dollar is making American goods and services more expensive abroad, contributing to a soft U.S. economy and providing a headwind for U.S exports to Europe. The decline in the value of euro did little to help Eurozone exports in the first quarter, as they slowed amid a sluggish global economy.
The European Union has been lumbering through a years-long debt crisis and the potential exit of Greece. Back to back quarters with 0.4 percent growth amount to the best quarterly growth rates since the second quarter of 2013, analysts said. It’s hardly stellar growth, but it’s not a zone going backwards any longer.
“Limited global growth is currently limiting the upside for Eurozone exports, but we expect this to improve later on in 2015 and, particularly, in 2016,” said Howard Archer, European economist for forecaster IHS Global Insight, in an investment note. “However, the upside for growth in a number of Eurozone countries continues to be limited by relatively poor competitiveness amid ongoing significant structural problems.”
Events in Greece could weigh down on Eurozone sentiment and growth if there is a Greek default or even ultimate exit from the Eurozone, he added.
Barring any shocks, Archer sees the Eurozone growing at an annual rate of 1.5 percent, about a percentage point less than the 2.5 percent growth rate many economists are now projecting for the U.S. economy for 2015.
Comments