Analysts Pessimistic Over Europe's Second Quarter Economy

Although Europe enjoyed higher than expected growth in the first quarter, analysts remain pessimistic about the European economy in the second quarter.

The European Union's statistics office revealed Tuesday that the 15-member eurozone's economy enjoyed an annual 2.2-percent growth rate in the first quarter due to increased investment and strong economic performances in a number of countries.

However, analysts estimated that both the German and European economies are set to slow in the second quarter, as oil prices will increase costs for consumers and companies while the euro's advance will make exports less competitive.

The first quarter was an outlier and shouldn't be read as where the economy is going, said Michael Hume, chief European economist at Lehman Brothers International in London.

Germany enjoyed its fastest quarterly economic expansion in 12 years, as its construction spending jumped by 4.5 percent in the first quarter. German builders benefited from an exceptionally mild winter, the German weather service said.

The German economy will shrink in the second quarter due to a fading construction effect and factors such as a payback in inventories and statistical adjustments.

The eurozone as a whole may record zero growth this quarter, Hume said before the data release.

European Central Bank council member Nout Wellink also said Monday that the eurozone economy has not yet felt the full effect of the U.S. slowdown, suggesting that the U.S. impact will become more obvious in dragging down Europe's economy in the second quarter.

 

 

Source: CRIEnglish