Euro Area Savors Growth Spurt as Italy Shakes Off Its Recession

(Bloomberg) -- Europe’s economy began 2019 with an unexpected growth spurt as Spain outperformed and Italy shook off a recession, easing pressure on the European Central Bank to add stimulus.

The 0.4 percent increase in euro-region gross domestic product during the first quarter reported by Eurostat was twice the pace at the end of last year and more than economists predicted. Strong investment in Spain, buoyant consumer spending in France and a faster-than-anticipated rebound in Italy gave a fillip to expansion in the 19-nation currency bloc.

The euro strengthened after the data on Tuesday, trading up 0.3 percent at $1.1212 at 12:02 p.m. Frankfurt time.

Euro Area Savors Growth Spurt as Italy Shakes Off Its Recession

While the region’s growth rate was below the average of the past five years, it marks the second quarterly acceleration since a downturn in trade and factory activity pulled the economy close to a standstill last summer. The current company reporting season in Europe is also shaping up to be fairly bullish -- Airbus SE’s earnings surged in the first quarter on higher output of its A320 narrow-body jet.

Italy’s rebound in the quarter was a highlight, with the 0.2 percent expansion exceeding the 0.1 percent median forecast of economists. Officials said agriculture, industry and services all saw growth. The region’s third-biggest economy spent the second half of last year contracting.

Germany is the only one of the region’s four biggest economies not to report first-quarter figures on Tuesday. The euro-zone outcome includes some German data provided to Eurostat by the country’s national statistics office. Official numbers there will be released on May 15.

What Bloomberg’s Economists Say:

“The outcome reduces the chances of additional stimulus, such as generous conditions for the newest round of TLTROs, being announced by the Governing Council in June.”

David Powell and Maeva Cousin, euro-area economists
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Business confidence continued to soften in April, and the ECB has already said it won’t raise interest rates this year. Policy makers have expressed mixed feelings about whether a rebound initially penciled in for the second half will pan out.

More evidence of weakness across the region could force them to make recently announced stimulus tools more accommodative to support growth.

Consumer spending0.4%0.3%

While the pickup in Italy and resilience in Spain and France provides a brightening picture for the region, external trade conflicts and homegrown difficulties, notably an upheaval in Germany’s car industry, have yet to clear.

Other Data Today:

  • German unemployment fell 12,000 in April, more than economists expected, to a record low of 2.22 million. The labor agency said demand for workers continues to be very high.
  • Italian joblessness slipped to 10.2 percent in March, the lowest since August.
  • In France, consumer spending unexpectedly declined in March, while inflation accelerated to 1.4 percent.
  • GDP growth in Lithuania slowed to 1 percent after 1.3 percent. Austria’s economy expanded 0.3 percent.
  • Latvia’s economy shrank 0.3 percent after a 1.2 percent expansion previously

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