European Growth Accelerates, As Inflation Eases

European economic growth accelerated more than forecasted and inflation eased, both will be welcomed news for the ECB. A significant acceleration of growth in Germany of 1.5% from 0.3% the quarter prior, made up for weakness in Spain, the Netherlands and Italy. Europe’s largest economy saw growth accelerate to its fastest pace in 12 years as demand from emerging markets and efficient producers offset a U.S. slowdown and strong Euro. Meanwhile, the region saw year over year headline April consumer prices eased from 3.6% to 3.3% the month prior and the core index declined to 1.6% from 2.0% for the same period. Energy and food costs fell to 2.4% from 2.7% in March, while transportation costs eased to 4.8% from 5.6%. The readings validate the ECB’s policy of holding rates steady, as the region has been able to weather the headwinds from the U.S. and price stability is improving. However, prices still remain far from the central bank’s 2% target which will keep them from changing their stance. The next challenge for the MPC will be the disparity in growth in the region, with Germany accounting for the majority of the advance; other leaders may call for a rate reduction to help their economies.

DailyFX

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