Eurozone economy loses momentum at the start of the year
Growth in the Eurozone economy lost some of its momentum at the beginning of 2018, although the expansion continued at a healthy pace well above that of the UK.
Eurozone GDP expanded by 0.4 per cent in the first quarter, according to the European Commission, in line with expectations, following a boom over the course of 2017.
The slowdown, to the lowest growth rate since the third quarter of 2016, follows three consecutive quarters of 0.7 per cent growth.
Read more: Broad-based growth in Eurozone confirmed after boom year
Economists had warned growth could be dented by bad weather as well as a flu outbreak in Germany, the bloc's economic powerhouse, but the slowdown was in line with expectations.
Kay Daniel Neufeld, managing economist at the Centre for Economics and Business Research, said the figures show the economy has "cooled noticeably", but said it would be "premature to conclude that the Eurozone is headed for a recession" given signs of continued strong performance in Spain.
"Largely stable and gradually improving labour markets in the Eurozone are a further anchor for the economic recovery," he added. Unemployment data also published today showed the proportion of people out of work remained steady at 8.5 per cent in March, down from 9.4 per cent a year earlier.
Read more: Economists await a tale of two economies in the UK and Europe
The dip in growth will give the European Central Bank food for thought ahead of its planned withdrawal of monetary policy stimulus, in the form of monthly bond purchases, in September. Potential trade disruption from US tariffs – delayed again this week – could also give discomfort to policymakers trying to remove a monetary cushion.
Florian Hense, an economist at Berenberg bank, said: "We expect some second-quarter bounceback from the exceptional factors that hit output in the first quarter, and a general rebound in activity in the second half as trade tensions ease."
Read more: Eurozone inflation dips back down to give ECB further cause to pause
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