Growth in euro zone revised upwards to highest rate in a year

The euro zone economy grew by more than previously estimated in the first quarter and at its fastest rate in a year, European Union statistics agency Eurostat said on Thursday, ahead of a European Central Bank (ECB) meeting likely to keep policy unchanged.

Eurostat said the 19-country euro zone expanded by 0.6 per cent quarter on quarter and by 1.9 per cent year on year. That compared with earlier estimates of 0.5 and 1.7 per cent respectively.

On an annualised basis, the euro-zone economy was expanding at a rate of 2.3 per cent in the January-March period, far outstripping the 1.2 per cent rate of the United States. Solid economy growth but subdued inflation has left the ECB in a quandary.

Sluggish wage growth

ECB president Mario Draghi is yet to be convinced that a recent rebound of inflation is durable because wage growth remains sluggish. The ECB is widely expected to keep policy unchanged, including its €2.3 trillion bond-buying programme and sub-zero interest rates, despite resistance from cash-rich Germany.

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However, the robust growth could lead the ECB to remove a reference to “downside risks” in its statement.

Eurostat said household consumption contributed 0.2 percentage points and gross fixed capital formation 0.3 points and government consumption 0.1 points to the first-quarter growth figure. The contributions of external trade and inventories were neutral. – (Bloomberg)