Frankfurt: Euro zone's economic growth quickened in the first quarter as stronger-than-predicted performances from France and Italy made up for weaker momentum in Germany.
Gross domestic product in the region rose 0.4% in the first three months of the year after expanding 0.3% in the previous three months, the European Union's statistics office in Luxembourg said yesterday. That's in line with the median of 42 estimates in a Bloomberg survey.
The euro zone's economy benefited from the sharp drop in oil prices since the second half of 2014, a weaker currency and a boost to confidence from the prospect of more European Central Bank stimulus.
Policymakers have warned that the upswing may not be sustainable unless governments step up economic reforms, while there are also risks related to the Greek crisis that threatens to splinter the currency bloc.
"The euro zone's economic recovery firmed moderately in the first quarter," said Christian Schulz, senior economist at Berenberg Bank in London. "Strong tailwinds from cheap oil, a weaker euro and a much more aggressive ECB helped across the currency area, while the Russian risk receded and Greece's tragedy has not had a major impact outside Greece itself."
Euro zone's GDP data are measured primarily on a quarter-on-quarter basis, contrasting with the US approach of looking at annualised data.
While German growth slowed more than predicted, economists say the nation's recovery is not at risk. GDP rose 0.3% from the fourth quarter, when it was up 0.7%. The expansion was driven mainly by domestic demand, the statistics office said. Private and government consumption rose and both construction and equipment investment picked up markedly from the previous quarter, while net trade weighed on the economy.
"The German economy managed an impressive comeback at year-end 2014, and this trend of accelerating economic activity remains intact," said Martina von Terzi, an economist at UniCredit Bank AG in Munich.
"More is likely to come in 2015. We expect economic activity to show solid growth in the coming quarters."
The French economy beat estimates with growth of 0.6%, the fastest pace in almost two years, in what may mark the start of a more sustained economic revival after three years of sluggish growth.
The Commission and the International Monetary Fund both see expansion of in excess of 1% this year, more than twice the annual pace recorded since President Francois Hollande came to power in 2012.
That would still be below the rate projected for the euro area. The European Commission raised its outlook for the region on May 5, predicting GDP will increase 1.5% in 2015.
"The French result exaggerates economic momentum," said Stefan Kipar, an economist at Bayerische Landesbank in Munich. "Growth is only supported by strong private and government consumption, which seems to have been primarily supported temporarily by a weaker oil price. Investment and trade once again disappointed."
Spain, where the government has liberalised the labour market and tackled the legacy of bad debt held by banks since being hit by the crisis, recorded its fastest growth in seven years in the quarter. The economy expanded 0.9% and is set to grow almost twice the speed of the euro area this year.
The Italian economy expanded 0.3% in the first quarter, beating estimates. Dutch growth slowed more than anticipated to 0.4%.
"The economic situation and the short-term outlook for the euro area are currently brighter than they have been for several years," ECB president Mario Draghi said on April 17.
He added that the "sluggish pace at which structural reforms are being implemented will likely weigh on growth.''
Greece may yet throw a spanner in the works. The economy fell back into recession in the first quarter, raising pressure on the government to reach an agreement with creditors over the next bailout payment.
Gross domestic product contracted 0.2% in the three months through March after shrinking 0.4% in the previous period. The median estimate in a Bloomberg survey was for a 0.5% drop.
The shrinking economy puts Prime Minister Alexis Tsipras's government under further pressure to implement measures demanded by its creditors to meet the conditions of a bailout it was elected to overturn.
Greek officials expressed optimism about progress toward a deal after a meeting with euro-region finance ministers on Sunday, though German Finance Minister Wolfgang Schaeuble said Greece has yet to offer "substance" on reforms.