While the US economy was crushed by harsh snow in Q1, with its GDP set to be revised to nearly -1.0% (yes, we know the real reason was the collapse in Chinese end demand and the soaring dollar but don't tell the Fed), Europe must have had a very balmy winter, because as Eurostat reported earlier today, Europe grew (and considering Europe estimates the "benefit" for prostitution and illegal drugs to the economy, we use the term loosely) 0.4% in the first quarter, a 1.6% annualized growth rate, in line with expectations, up from 0.3% last quarter and a year ago, and tied for the highest GDP print in 4 years.
Some other statistics from the WSJ [11]: for the first time since the first half of 2010, all four of the Eurozone’s largest economies recorded growth, and for the first time since the first quarter of 2011, the currency area’s economy grew more rapidly than both the U.S. and the U.K.
[12]
Then again this is perhaps the 3rd false dawn for the Eurozone in the past 5 years. Sure enough, the WSJ offers hope:
That combination of faster and more evenly spread growth will feed hopes that 2015 could mark a decisive year for the eurozone in its efforts to recover from its debt crisis, aided by fresh stimulus from the European Central Bank, lower oil prices and signs that bank lending may be set to increase after years of decline.
Then again, this time may not be different:
However, policy makers have openly expressed worries that the recovery may not be sustained, citing high unemployment, high government and corporate debt burdens, banking-system problems and weak investment spending. They contend that politically difficult overhauls in France and Italy, and an increase in investment in crumbling infrastructure in Germany and elsewhere, are the only way to achieve lasting growth in Europe.
There is also worry that as a a result of rising oil prices the boost to growth from higher disposable incomes may be fading, raising doubts about the future strength of the pickup.
Curiously, Germany’s economy slowed more sharply than expected, recording growth of 0.3% compared with 0.7% in the previous period. But France and Italy both exceed expectations, growing 0.6% and 0.3% respectively, having stagnated in the previous period. One wonders just how big the contribution from hookers and blow was in these two economic juggernauts.
Of course, the biggest conern is that the ECB's QE is working "too well", and with Europe on track for a full recovery, and with the ECB clearly running out of securities to monetize the recent tumble in yields notwithstanding as a negative 10Y Bund print remains just a matter of time, Europe's strong growth may just be the worst possible news for Europe.
And then there is Greece which is back in recession with GDP falling 0.2% in the first quarter, after a 0.4% decline in the final three months of last year.
Speaking of Greece, to all those concerned that Europe's growth may be "too strong", when -not if- Greece is kicked out of the Eurozone, all those strong GDP numbers will soon become a distant memory.
Finally, here is the full breakdown.
[13]
