French growth slowdown tests ECB optimism
French economic growth slowed slightly more than expected at the start of the year, adding to signs of a temporary slowdown in the euro zone a day after the European Central Bank played down concerns of softness, Reuters reports.
Growth data from Austria and Spain and euro zone consumer and business morale, meanwhile, painted a mixed outlook for the 19-nation bloc.
The ECB sought to calm concerns about a slowdown in the euro zone economy on Thursday with sources telling Reuters policymakers were keen not to upset investors’ expectations that its stimulus program would end this year.
France’s INSEE statistics agency said in a first estimate on Friday that the euro zone’s second-biggest economy grew 0.3 percent in the first three months - the slowest rate since the third quarter of 2016.
That marked a slowdown from 0.7 percent growth recorded in the final three months of last year and was slightly below economists’ average forecast for 0.4 percent in a Reuters poll.
Meanwhile, Austria reported that growth eased marginally to 0.8 percent in the first quarter and Spain saw the third straight quarter of 0.7 percent growth.
Against that backdrop, Capital Economics European economist Stephen Brown said the Austrian, French and Spanish growth estimates suggested data for the whole euro zone on Wednesday would show growth slowed to 0.4 percent from 0.7 percent.
“While disappointing in light of last year’s strong expansion, a quarterly gain of 0.4 percent would be no disaster and surveys suggest that growth will pick back up,” Brown said in a research note.
The European Commission’s economic sentiment indicator offered some assurance that any slowdown would only be temporary with business managers and consumers reporting better than expected business morale.
Likewise, German jobless data on Friday sounded a positive note, with the number of people out of work in Europe’s biggest economy falling by 7,000 and the unemployment rate steady at 5.3 percent.