Eurozone recession fears fade as growth picks up

LONDON — The recent slowdown in the eurozone economy, which had stoked fears that another recession was around the corner, appears to have come to an end.

Official figures released Tuesday show that the 19-country single currency bloc saw economic growth double in the first quarter of the year and that has helped unemployment fall to its lowest level since the global financial crisis.

Eurostat, the European Union's statistics agency, said the eurozone economy expanded by 0.4% in the first quarter from the previous three-month period. That's double the rate experienced in the last quarter of 2018 and suggests that a period of rapid slowdown may be over.

Eurostat did not provide details though some eurozone countries have released national figures. Spain did particularly well in the first quarter of 2019 with quarterly growth of 0.7% and Italy nudged out of a very modest recession with a 0.2% quarterly expansion. But France underwhelmed with a rate of only 0.3% with growth still feeling the effects of the yellow vest protest movement.

The prevailing view is that the European Central Bank's cheap monetary policy - under which it has kept interest rates at super-low levels - is continuing to help economic activity, particularly consumer spending.

"Given the continuing weakness in manufacturing, this is a very respectable result," said Christoph Weil, an economist at Commerzbank. "It shows that domestic demand, fueled by the ECB's ultra-expansive monetary policy, continues to support the economy."

Despite the quarterly increase, the eurozone is far short of the growth it was posting before the slowdown began in the middle of last year — compared with the year before, the eurozone economy was only 1.2% bigger. By contrast, the United States last week reported that the economy grew at an annualized rate of 3.2% during the first three months of the year, which equates to quarterly growth of around 0.8%.

The eurozone, like many other parts of the global economy, faltered last year as trade tensions between the United States and China became more acute, oil prices rose and uncertainty over Britain's departure from the EU weighed on business confidence. Some economists were predicting that the region was heading for another recession.

"We can say that calls for a eurozone recession were certainly premature," said Peter Vanden Houte, an economist at ING. "Declining unemployment and gradually rising wages are supporting household consumption, while easy financing conditions remain in place."

One clear sign that the eurozone is faring better than during the difficult debt-crisis years of the first half of this decade has been the fall in unemployment. The jobless rate dropped to 7.7% in March, its lowest level since Sept. 2008, the month when the global economy was reeling from the shock of the collapse of U.S. investment bank Lehman Brothers, arguably the most dramatic moment during the financial crisis.