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Euro-Region Expansion Beats Forecasts Driven By Germany, France

Euro-region economic growth accelerated to the fastest pace since the second quarter of 2010, powered by forecast-topping expansion in Germany and France that offset the impact of tougher austerity measures from Ireland to Spain.

Gross domestic product in the 17-member euro area rose 0.8 percent from the fourth quarter, when it increased 0.3 percent, the European Union’s statistics office in Luxembourg said in a statement today. Economists had forecast the economy to expand 0.6 percent, according to the median of 31 estimates in a Bloomberg News survey. GDP rose 2.5 percent from a year ago.

European exporters have helped fuel economic growth as fiscal belt-tightening and rising energy costs curbed consumer demand. Siemens AG (SIE), Europe’s largest engineering company, on May 4 raised its full-year profit forecast. Still, European economic confidence weakened in April and German investors grew less optimistic, suggesting the recovery is losing some momentum in the current quarter.

“I’m rather optimistic for the euro-region outlook overall, while periphery states remain a problem,” said Christoph Weil, a senior economist at Commerzbank AG in Frankfurt. “Germany will remain the growth pillar. The second quarter will show some weakening in growth after a buoyant first quarter.”

In Germany, Europe’s largest economy, GDP rose 1.5 percent in the first quarter after increasing 0.4 percent in the previous three months. That’s helping shield the euro region from a debt crisis as peripheral countries struggle to restore growth. In Greece, the economy grew 0.8 percent, while Portugal shrank 0.7 percent.

The European Commission will release its latest economic forecasts at 11:15 a.m. in Brussels. The statistics office will release a breakdown of first-quarter GDP next month.

To contact the reporter on this story: Simone Meier in Zurich at smeier@bloomberg.net

To contact the editor responsible for this story Craig Stirling at cstirling1@bloomberg.net

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