The collapse in the price of oil at the end of last year generated a mini-boom in consumer spending in the Eurozone’s largest economies in the first quarter of the year, allowing the region to overtake the U.S. in growth for only the second time in four years.
But the figures released Wednesday, heavily influenced by an unrepeatable swing in oil prices that is already reversing, suggest that it’s still too early to call the recovery self-sustaining.
Eurostat said the Eurozone economy grew 0.4% in the three months to March, after a 0.3% gain at the end of last year. The year-on-year rate accelerated to 1% from 0.9%. For the first time since 2010, all four of the currency union’s largest economies–Germany, France, Italy and Spain–posted positive growth. However, the Greek economy shrank by 0.2%, tipping it back into recession.
France posted the strongest quarterly rise in gross domestic product in two years (up 0.6%) in the first three months of the year, but economists said the headline number flattered an underlying picture that still has key weaknesses.
“Imports rose much faster than exports, highlighting that the weaker euro is not a lasting fix for France’s competitiveness problems,” said Christian Schulz of Berenberg Bank in London.
By contrast, German GDP growth slowed to 0.3% on the quarter. That missed expectations of 0.5%, albeit in a largely benign way: the Federal Statistics Office said that investment and domestic consumption had both increased markedly since the end of 2014, but that the headline number was depressed by the fact that imports rose faster than exports. Most economists consider Germany’s runaway current account surplus a major source of instability and risk for the world economy and won’t be displeased by any sign of it narrowing.
The oil price effect was nowhere stronger than in France, where households spent the windfall freely. Consumption rose 0.8% on the quarter, as household spending rose 1.4%.
But inventories, which had also inflated the 1Q GDP figures in the U.S., contributed 0.5% of the total 0.6% expansion. Investment, by contrast, was weak: fixed capital formation fell by 0.2% and construction output, typically one of the largest components of investment, fell by 1%.
Elsewhere, Italy also posted its strongest quarter since the middle of 2011, with a 0.3% rise in output, slightly ahead of expectations. The Italian economy is still pretty much flat in year-on-year terms, though.
It’s a much better story in Spain, the Eurozone’s new growth engine, which last week put out preliminary figures showing GDP rose 0.9% in the quarter–the best performance since before the Euro debt crisis exploded.