The latest eurozone GDP data show France and Italy beat forecasts, but the Greek recovery has been snuffed outBank of England inflation report - highlightsGreece is shrinking againEurozone beats US and UKItaly GDP up by 0.3%... ditto GermanyFrance smashes forecasts 5.24pm BST Despite positive signs for the eurozone economy, it was the US which proved a dominant force for European markets. Weaker than expected US retail sales sent the dollar to a three month low against the euro, in the belief that an interest rate rise by the Federal Reserve had receded further into the distance. The strong euro sent several European equity markets lower, especially export-heavy Germany, although Spain and Italy escaped the damage and the UK market also managed to remain in positive territory, albeit off its best levels. The final scores showed: 5.00pm BST Over in Athens the finance ministry’s entire top brass are holding urgent talks in a bid to reach final agreement on strategic measures ahead of that hotly anticipated cabinet meeting prime minster Alexis Tsipras has said he will call. Our correspondent Helena Smith reports:Word is coming through that taxes are at the focus of the meeting called by finance minister Yanis Varoufakis. The talks, which are also being attended by Panaghiotis Nikoloudis, the minister in charge of combatting corruption, are aimed at finalising strategy before the cabinet meeting is held.Tsipras’ leftist-led administration has signalled that a barrage of new levies will be among the fiscal measures it will announce in its bid to unlock €7.2bn in international bailout funds held over by the EU and IMF. Privatisations - not least the sale of Piraeus port still in the hands of the state - are also topping the agenda as the government attempts to quash mounting criticism of its policies from within its own ranks. 3.39pm BST More fuel for the rising oil price.After Tuesday’s news from the American Petroleum Institute that US stockpiles fell for the second week in a row, the US Energy Information Administration has also recorded a fall in stocks.#Crude stocks fell by 2.2 million barrels last week, says the EIA - significantly more than expected (0.1m) and above API's estimate (2m)^FRInventories of #crude products also fell last week: #gasoline stocks by 1.1 million and distillates by a sharp 2.5m ^FR 3.10pm BST The growth in the eurozone is down to Mario Draghi’s QE bounce, reckons economics correspondent Phillip Inman (see also below). Phillip writes:There’s a return to healthy growth in the eurozone. Surprised? It’s called the QE bounce.First the head of the central bank says he will inject £1.1tn into the 19-member economic bloc under a programme of quantitative easing (QE). Next, bank lending gets easier. More importantly, businesses breathe a sigh of relief, realising that after four years of austerity someone has put some serious money behind the eurozone’s recovery. Related: Eurozone returns to healthy growth after QE bounce – but what next? 3.04pm BST Some better news for Greece with the country recording an unexpected budget surplus for the first four months of the year. Reuters reports:Greece’s central government recorded a primary budget surplus of €2.16bn in the first four months of the year, versus a targeted small budget deficit due to a slash in spending, the finance ministry said on Wednesday.The central government surplus excludes the budgets of social security organisations and local administrations and is different from the figure monitored by Greece’s EU/IMF lenders, but indicates the state of the cash-strapped country’s finances. 2.43pm BST Wall Street has opened higher after the latest data seemed to push any US interest rate further into the distance, almost certainly beyond the June Federal Reserve meeting at least.The Dow Jones Industrial Average is currently up 44 points or 0.25%, while most European markets apart from Germany are also in positive territory. 2.26pm BST Barclays cuts US Q2 GDP growth tracking estimate to 2.6% from 3.0% after soft April retail sales. Also cuts Q1 estimate to -0.6%. 2.10pm BST April Retail Sales: Slow to .8% Y/Y, ex-gas 3.6% Y/Y and control group to 2% Y/Y pic.twitter.com/6mThdgKdPg 2.02pm BST Consumers have failed to spash out as much as expected in April, as hopes of a bounceback after the first quarter’s poor weather were dashed, and the chances of an interest rate rise receded further.According to the Commerce Department, April retail sales were unchanged at 1.1% (with the March figure revised upwards from 0.9%). Analysts had expected a 0.2% increase, but sales of big ticket items like cars were disappointing. US retail sales for April are softer than hoped, coming in flat on the month versus a 0.2% month on month consensus. Admittedly, the March figure was revised higher by two tenths of a percentage point, but the overall story is one of subdued spending by consumers. Indeed, strip out the volatile components of autos, gasoline and building materials to come up with the so called “control” group – this has a better fit with overall consumer spending trends – and we saw flat growth versus a consensus forecast of 0.5% growth.Consequently, we still aren’t really seeing the big recovery that was anticipated in the wake of the weather depressed first quarter. This just really reinforces the view that a June hike isn’t happening and that September looks the more probable start point. 1.54pm BST And here’s a full breakdown of European growth in the last quarter: 1.39pm BST A quick recap of the main points, for anyone just tuning in.... Europe’s recovery continues. Euro area GDP up by 0.4% in Q1 2015, +1.0% compared with Q1 2014 #Eurostat http://t.co/kHA60SNaZk pic.twitter.com/E5ztjqT5J6 Related: Eurozone GDP: French economy smashes expectations with 0.6% growth Related: Mark Carney could depart Bank in 2018 with interest rates at 1.5% 1.12pm BST The EC is also raising the pressure on Finland to bring its deficit into line.#finland does no longer respect deficit & debt criterias. @EU_Commission will decide soon if excessive deficit procedure @pierremoscoviciCommission has decided not to escalate the macroeconomic imblance procedure against Germany on surplus #EuropeanSemesterIn a slow-growing world that is short aggregate demand, Germany’s trade surplus is a problem. Several other members of the euro zone are in deep recession, with high unemployment and with no “fiscal space” (meaning that their fiscal situations don’t allow them to raise spending or cut taxes as a way of stimulating domestic demand). Despite signs of recovery in the United States, growth is also generally slow outside the euro zone.The fact that Germany is selling so much more than it is buying redirects demand from its neighbors (as well as from other countries around the world), reducing output and employment outside Germany at a time at which monetary policy in many countries is reaching its limits. 1.03pm BST The European Commission has recommended that Britain gets its deficit down, builds more houses, and tackles the skills gap.That’s the conclusion from its latest report into the UK economy, just released:Here you can find @EU_Commission country-specific recommendations 2015 for each Member State: http://t.co/SWmfT6GGWR #EuropeanSemester 12.31pm BST Over in Athens the finance minister Yanis Varoufakis has ruled out any suggestion that the crisis-hit country is planning to adopt a parallel currency.“In negotiations there are mutual concessions,” he told reporters gathered outside the finance ministry. 12.09pm BST Greece’s finance minister appears to have hinted that the government might not last the year.#Greece Fin Min Varoufakis: I can't guarantee that the govt will be in power until January https://t.co/UhgJSJQcWU@EfiEfthimiou Means a deal will be reached between EU/Greece . . . one contrary to Syriza campaign promises cc @tradinglikeafox 12.04pm BST Mario Draghi should get a lot of credit for the revival in the eurozone economy. “Draghi has thrown the kitchen sink at Europe, and it seems to be beginning to work. The European economy is showing signs of economic improvement and likely there will be more to come. Already PMI and credit growth are showing decisive improvements. The combination of a lower Euro boosting exports, ultra-low borrowing rates, and enhanced liquidity as a result of QEare all helping the economy.“Yes, Greece remains a fly in the ointment, but we don’t see this as the systemic risk it was in 2012. Overall, the Eurozone is reacting to QE just as the US and the UK did, and investors should feel confident that growth will build momentum during the second quarter.” 12.01pm BST Economists have hailed the news that the eurozone (and indeed the wider EU) grew by 0.4% in the first three months of this year, beating the UK and America.“Overall, while slightly below our forecasts, the eurozone GDP figure for Q1 was encouraging.“With plenty of scope for exports and investment to accelerate from current levels, we continue to expect growth of around 0.5% quarter-on-quarter in Q2, despite some possible slowdown in consumption, as oil prices have come back up from their lows.”“Overall I think this is a very strong set of numbers, even though some of the individual country reports were still mixed.“I think that it will certainly support the case for stocks and help corporate earnings. As this happens, the quite lofty valuations that we’re seeing in equities will start to look more justified.”"A reminder that Europe has been quietly going about the business of repairing its economy." Reactions to EZ GDP: http://t.co/80duG2Qmof 11.38am BST Are European policymakers right to be so complacent about the dangers and consequences if Greece were to leave the eurozone? 11.23am BST Ludovic Subran, chief economist at Euler Hermes, reckons the Bank of England’s forecasts are still too optimistic:#UK heyday is behind: the recovery peaked last year. Now time for a midterm game plan for sustained (nominal) growth https://t.co/b4BwYS4g49Numbers don't add up. We have 2.2% for #UK growth at best for this year https://t.co/j8tcd6XuBP 11.16am BST Paul Mason of Channel 4 accuses the Bank of England of dangerous inertiaInflation falls to zero, you do nothing, people feel a short-term rise in real wages. the government wins re-election, you still do nothing, he says. 11.09am BST Is the Bank of England worried that the pound is at a seven year high, following a swathe of interest rate cuts by other central banks? Is there a currency war underway, asks Phil Aldrick of The Times.Carney replies that sterling’s strength is a factor in the path of interest rates -- in other words, a strong pound means borrowing costs may stay low for longer.I'm utterly frustrated by BoE inflation report pressers. These are powerful politicians yet nobody asks political questions. I'm about to. 11.09am BST What are the three big challenges facing the UK economy?Mark Carney says the challenge facing the Bank is to get inflation back to target, and keep it there. 11.04am BST What does the Governor make of the recent price falls in the sovereign bond market? Carney explains that the Bank had been surprised that the longer-term yield curve has flattened (ie, that governments could borrow so cheaply for a long time). 10.57am BST And why has the Bank of England downgraded its forecast for productivity growth?Complete turnaround in #productivity by #BoE over last two years. Low productivity is a fact of life now for the BOE not temporary effect 10.56am BST Carney seems to be downplaying any econ impact of political uncertainty (eg over EU referendum) or on the austerity policies of the new govt 10.55am BST What work has the Bank of England done into the impact of the government’s plan for an EU referendum, asks the BBC’s Robert Peston?Carney says the Bank has looked at this issue, though its regular surveys of UK companies. 10.49am BST Back in Greece, there are reports that prime minister Alexis Tsipras could issue a ‘proclamation’, following today’s cabinet meeting (see 9.51am)Greek media report that PM #Tsipras will make a proclamation later today. No info on when, or what about. 10.47am BST BOE to adjust policy to gov fiscal stance. $GBPUSD coming off a bit now. 1.5674 10.46am BST Larry Elliott, our economics editor, reminds Mark Carney that growth slowed sharply after the 2010 election. Why should it be different this time?Carney explains that it depends on the path of fiscal consolidation, which depends on the decisions of the government. 10.43am BST Onto questions....Was the Bank of England surprised by the election result, and has it changed its economic forecasts since the Conservative Party won a majority? 10.41am BST Carney also touches on the eurozone, and suggests that Britain is pretty-well protected from Greece’s woes.Any intensification in the Greek crisis would probably only have a modest impact on UK growth, he says.Carney: Any intensification of the Greek crisis would likely have only a moderate impact on UK growth 10.38am BST Mark Carney is also warning that UK productivity remains weak - one factor, he suggests, is that there has been a “disproportionate” increase in low productivity jobs since the recovery. 10.36am BST Mark Carney, BoE governor, has written a second letter to the chancellor explaining why inflation is below target (it’s currently zero). 10.34am BST The Bank of England’s quarterly inflation report press conference is underway, and being streamed live here. 10.34am BST Back in the UK, the Bank of England is publishing its quarterly inflation report.And the top line is that the British central bank has cut its growth forecasts for this year, and beyond.“Growth is forecast to be at or a little below its historical average rate throughout the forecast period” 10.29am BST @euro GDP grew by 0.4% in q1 and 1% at an annual rate. Weaker Germany the main factor.Two countries in recession- Greece and Finland 10.29am BST Eurostat also reports that Cyprus’s economy grew by 1.6% in the last quarter, as it fights back from its bailout crisis of 2013.That means just two countries are in recession - Finland and Greece. 10.18am BST #Greece is back in recession. 1Q GDP drops 0.2% on quarter after -0.4% in 4Q 2014. pic.twitter.com/Vy00xE7elp 10.17am BST This chart confirms that the nascent Greek recovery has been snuffed out: 10.09am BST Greece has fallen back into recession!The Greek economy shrank by 0.2% in the first three months of this year, following a 0.4% contraction in the last three months of 2014.Elstat: #Greece GDP decreased by 0.2% in Q1 2015 compared to Q4 2014. Expectations at 0.5% contraction http://t.co/SzJzkZDs5vThe wages of Syrzia: Greece GDP in Q1 down 0.2%. 10.04am BST Eurozone Q1 GDP growth of 0.4% means it is now growing faster than the UK for the first time in, well, ages pic.twitter.com/kFQ5GKijfo 10.02am BST Here we go! The Eurozone economy grew by 0.4% in the first three months of 2015.That’s thanks to France’s unexpectedly strong growth, up 0.6%, and another solid month in Germany, up 0.3%. 9.51am BST Over in Athens prime minister Alexis Tsipras has called another cabinet meeting for this afternoon. This follows a marathon five-hour session on Tuesday, where cabinet ministers representing his anti-austerity government hotly debated concessions and “red lines”.“We will have neither a referendum nor elections [but] an honourable compromise.” 9.46am BST Back in the eurozone...and Portugal has reported growth of 0.4% in the first three months of 2015.Portugal GDP misses by a tenth 0.4% v 0.5% exp 9.36am BST The pound has hit a five-month high against the US dollar, up half a cent to $1.5727.Traders are welcoming this latest drop in UK unemployment, and calculating that it may herald an interest rate rise.#GBP spikes higher as UK labour data and earnings all strong. #BoE inflation report out in 1hr pic.twitter.com/ahuYI75pxb 9.34am BST Breaking news: the UK’s unemployment rate has fallen to 5.5%, its lowest level since the summer of 2008.The number of people out of work fell by 35,000 to 1.83 million, according to data just released by the Office for National Statistics.Unemployment rate drops to 5.5% and employment rate up to 73.5%. 202,000 more in employment in latest three months. Very good figures.Perhaps more importantly Avg UK Earnings (3M/Mar) better 1.9% vs 1.7% est vs 1.7% prev and Ex-bonus 2.2% vs 2.1% est vs 1.8% prev #gbp 9.21am BST So, the big news is that the eurozone’s five largest members all posted growth in the first three months of this year.A reminder of the key points so far: 9.11am BST It’s a morning of surprises... at 0.3%, Italy grew as fast as Britain and Germany last quarter.Italy Q1 GDP = UK Q1 GDP. Penalties in three months. 9.05am BST #Italy | Q1 PRELIMINARY GDP Q/Q: 0.3% V 0.2%E; Y/Y: 0.0% V -0.2%E ..knocking it out of the park in Italian GDP terms pic.twitter.com/gnz8hzQWEo 9.04am BST Get the bunting out! Italy’s economy expanded by 0.3% in the first quarter of 2015, faster than expected.However, that still means growth was flat over the last 12 months.Italy Q1 GDP comes in at 0.3% exp: 0.2% Prev: 0% 9.00am BST Corrrection. It appears that Austria is not reporting GDP data today, as I thought. Its statistics office did issue a preliminary estimate of 0.1% growth late last month. 8.58am BST Slovakia’s economy grew by 0.8% in the last quarter, beating forecasts of 0.6%. 8.53am BST European stock markets are rallying this morning, led by France.The French CAC has jumped by 0.9%, as traders welcome the news that its GDP rose by 0.6% last quarter. Yields lower, stocks higher. Makes a change pic.twitter.com/dIjday5qQC 8.49am BST It’s not a great day for Finland -- not only is its economy shrinking, but it’s about to get ticked off by Brussels for borrowing too much.Today Finland records negative growth, will be warned about its deficit, and will trigger Schadenfreude across the periphery. 8.41am BST Dutch Q1 GDP misses by a tenth 0.4% v 0.5% expected. 8.39am BST The Netherlands economy experienced a slowdown in the last quarter. Dutch GDP rose by 0.4%, down from 0.8% in the last three months of 2014 (which I think has been revised up from 0.5%) 8.21am BST Bad news for Finland. Its economy shrank by 0.1% in the first three months of the year, its statistics office has estimated.And that follows a 0.3% contraction in the last three months of 2014, meaning it is in recession.#GDP down second quarter in a row. #Finland plays in the same league with #Greece and #Cyprus. That's #recession http://t.co/4Q54xcJoVB#Finland's new govt coalition: A cheery bunch pic.twitter.com/jcikEkLKxn 8.08am BST Romania has beaten forecasts with quarterly growth of 1.6%. 8.07am BST More data is coming in.Hungary’s economy grew by 0.6% quarter-on-quarter in the first three month of 2015, or 3.4% compared to a year ago. Its statistics office said there was robust growth in manufacturing (mainly vehicles and electronics) and food production. 8.04am BST Analysts at BNP Paribas reckon the French GDP paints a unduly positive picture, because it is driven by household spending rather than business investment.BNP Paribas on French GDP: 'unexpectedly strong, but misleading' - driven by inventories, consumption + public spend. pic.twitter.com/EETz45N9E2 7.57am BST In the comments section, johnsnow92 has kindly explained why net trade had a negative impact on Germany’s growth rate:"Germany’s growth rate slowed because imports grew faster than exports."this doesn't make any sense, at allthis doesn't make any sense, at allIt makes when you calculate the GDP. 7.49am BST France’s finance minister, Michel Sapin, says today’s forecast-beating growth 0f 0.6% is “clearly comforting”, and bodes well for the rest of the year. “This first figure is very encouraging,....Our growth perspectives for 2015 are today clearly comforting.” 7.42am BST Thomas Gitzel, chief economist at VP Bank, blames weaker global demand for Germany’s slowdown:“Weak global trade is hitting German industry - an export heavyweight - and if the consumers start refraining from spending too, overall economic growth will decline rapidly.”“But there’s no reason to be miserable - the euro is weak and interest rates are low, both of which point to somewhat solid growth in the coming quarters.” 7.37am BST Germany’s economy is rather like its top football team, says ING economist Carsten Brzeski, good, but not quite good enough.As witnessed in yesterday’s soccer Champions League semi-final: a solid performance is not (always) sufficient to stay at the top. As Bayern Munich will probably now discuss new investments in its current squad, the German government should do the same for its economy.The labour market seems to have reached a level of full employment. New structural reforms would be needed to push unemployment below the level it has now been fluctuating around for two years. As regards investment, except for the construction sector, industrial production has moved rather horizontally for almost four years.Good but not good enough, or, the Bayern Munich factor. Quck take on German GDP data. http://t.co/LwZIBKBP3a 7.36am BST So #Germany growth slows more than forecast as #France accelerates 7.28am BST IHS Global Insight economist Diego Iscaro predicts that the French economy will grow faster than expected this year, but its jobless rate will remain too high:The sharp acceleration in activity during the first quarter ...points to growth in 2015 being somewhat stronger than the 1.0% expected by the government,” “However, we still do not estimate that the recovery will be strong enough to make a significant dent into France’s high unemployment rate”. 7.27am BST Who predicted this last year? France’s economy has grown twice as fast as Germany between January and March, and also twice as fast as the UK. 7.20am BST And here’s a Destatis chart, confirming that Germany’s growth rate has slowed: 7.17am BST Germany’s growth rate slowed because imports grew faster than exports.Destatis, the stats body, explains:According to provisional calculations, exports of goods and services were slightly up at the beginning of 2015 compared with the fourth quarter of 2014, imports recorded a much stronger increase. 7.09am BST #Germany disappoints. Q1 preliminary GDP comes at 0.3% QoQ lower than expected 0.5%. pic.twitter.com/AtdnidfSiM 7.02am BST Just in: Germany’s economy grew by 0.3% in the first quarter of 2015, weaker than expected.That’s a big drop on the 0.7% growth achieved in the last three months of 2014.MISS: German GDP (Q1) 0.3% QoQ vs 0.5% est vs 0.7% prev; 1.0% YoY vs 1.2% est vs 1.4% prev #eur 6.53am BST This charts shows how household spending (consumption) drove French growth in the last quarter, while business investment (GFCF) dipped. The big drop in net trade is because imports outpaced exports. 6.46am BST France needs to keep growing at this rate to bring its jobless rate down from record levels, says Bloomberg economist Maxime Sbaihi.France needs much more Q1-like quarters to reverse the investment decline & finally start bringing down a record-high unemployment rate. 6.43am BST Although France’s recovery is impressive, it was driven by consumer spending rather than business investment. That’s not a great sign.INSEE, the statistics office, explains:In the three first months of 2015, household consumption expenditure accelerated (+0.8% after +0.1%) while total gross fixed capital formation (GFCF) decreased again (–0.2% after –0.4%). Overall, total domestic demand (excluding inventory changes) increased: it contributed for +0.5 points to GDP growth (after +0.1 points in Q4 2014).FRANCE: GDP beats expectations, grows 0.6% in Q1 thanks to household consumption. But total investment fell for seventh consecutive month... 6.39am BST #French #GDP grew by 0.6% in Q1, its highest growth in 2 years (INSEE). Forecast was at +0.4%. 6.36am BST Allez les bleus 6.34am BST Here we go..... and France has smashed expectations.The French economy grew by 0.6% in the first three months of this year, having stagnated in the previous quarter.FRANCE! 6.29am BST Today’s GDP data may show growth in France and Italy picked up, predicts Michael Hewson of CMC Markets:France, in particular is set to see a significant rebound in economic activity, from 0.1% to 0.4% for Q1, however it is difficult to see how this will be sustained given that its manufacturing sector PMI’s have stayed stuck in contraction for the last eleven months.Germany on the other hand is expected to see a little bit of a slowdown from 0.7% to 0.5% in Q1, while Italy is expected to show its first growth in over a year, coming in at 0.2%, up from 0%. If all these numbers come in as expected the broader EU GDP number is expected to come in at 0.4%. 6.26am BST Today’s growth data should show that the European recovery is gaining momentum, write my colleague Katie Allen:Eurozone politicians are hoping for glimmers of a long-awaited economic rebound this week, with growth in the single-currency bloc forecast to beat both the UK and US.Economists expect the lower oil price to have provided a fillip to eurozone growth in the opening months of the year and have pencilled in a 0.5% pick-up in GDP, according to a Reuters poll ahead of Wednesday’s figures. That would be the fastest for four years..... Related: Eurozone pins hope on long-awaited economic rebound 6.15am BST Good morning. Today we discover whether the European recovery is continuing. Continue reading...
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