The euro zone economy increased by 0.6% in the first quarter of 2016, the maximum rate for 12 months, facilitated by household expenditure and private sector investment, as per a report from the European statistics agency (Eurostat) on June 7th, 2016.
Eurostat stated that gross domestic product (GDP) improved by 0.6 percent from the preceding quarter and by 1.7 percent year-on-year. That correlated with its preliminary estimates of 0.6 and 1.6 percent on April 29th, 2016 and ensuing downward cut in its flash projection to 0.5 and 1.5 percent on May 5th, 2016.
The growth rate matched the level achieved in the first quarter of 2015, a pace only exceeded at the beginning of 2011, when the euro zone economy advanced rapidly at 0.9 percent.
The maximum contributions to complete euro zone GDP were household expenditure and private sector investment. Inventory fluctuations and public sector expenditure were also positive, but imports improved by more than exports.
In Germany, the quarter-on-quarter growth was at a robust 0.7%, the biggest economy in the euro zone. The Quarter-on-quarter growth was at 0.6% in France and 0.3% in Italy. Greece was the only euro zone country that witnessed a contraction. Its economy reduced by 0.5%.
According to European Commissioner Pierre Moscovici, “There would be stable growth this year but that the recovery could be faster. European growth is holding up and (that) means that the efforts being made are paying off. (But) it’s time to speed things up.”
The financial market volatility at the beginning of the year had not supported the region’s economy and an economic downturn in China still posed a risk.
The extremely accommodative monetary policy has established the environment for an increase in investment by ensuring access to funding is relatively easier and economical.
Fiscal policy in the euro zone is projected to be supportive of economic development this year. Although oil prices fell in the beginning of 2016 and extended the boost to real disposable incomes, the strength of this support would slowly diminish as the oil price revives.
The euro zone is the biggest market globally. Any economic crisis in the euro area could have a negative impact on the world economy.
An escalation could result in a turmoil in the financial markets and a steep increase in global risk aversion, thereby resulting in a contraction of economic activity in developed nations.
Hence, growth in the euro zone is good for increasing global employment, facilitating fiscal austerity and ensuring financial sector stability.