Euro zone economy accelerates, but prices fall more than expected

Gross domestic product in the euro zone up 0.6 per cent on a quarter-on-quarter basis

The euro zone economy accelerated more than expected in the first quarter, preliminary data showed on Friday, but consumer prices also dropped by more than forecast in April because of a steep fall in energy costs.

The European Union’s statistics office Eurostat said gross domestic product in the 19 countries sharing the euro rose 0.6 per cent quarter-on-quarter in the January-March period, up from 0.3 per cent growth in the previous three months.

Economic polled by Reuters had expected quarterly growth of 0.4 per cent. On a year-on-year basis, euro zone GDP rose 1.6 per cent in the first quarter, beating expectations of a 1.4 per cent increase.

Eurostat does not provide a detailed breakdown of the numbers in its first GDP estimate.

Meanwhile, consumer prices fell 0.2 per cent year-on-year in April, Eurostat said, after holding flat in March, a steeper drop than the consensus forecast for a 0.1 per cent decline.

Falling energy prices, which tumbled 8.6 per cent year-on-year in April, were the main drag on the overall index, while unprocessed food was the main positive, rising 1.2 per cent.

Without those two most volatile items, in a measure that the European Central Bank calls core inflation – consumer prices rose 0.8 per cent year-on-year in April, less than the 1 per cent increase in March.

The ECB wants to keep headline inflation below, but close to 2 per cent over the medium term and has been buying government bonds on the market since last year to inject more cash into the economy and make prices grow faster.

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