Berlin - Storming performances by the German and French economies
in the first quarter highlight the yawning gap between the eurozone's strong
and weak and suggest the forecast for growth in the bloc is well under par.
Germany, Europe's largest economy, grew by a startling 1.5%
in the first three months of the year, data showed on Friday, with France only
paling a little in comparison, growing by 1%.
Growth of 0.9% and 0.6% had been forecast respectively,
leaving the 0.6% pencilled in for the 17-nation currency bloc as a whole liable
to be overshot.
Germany and France account for nearly half the region's GDP.
Both nations bounced back from a modest showing in the last quarter of 2010
when bad weather hit output.
The euro got a lift from the German GDP numbers, jumping to
a session high of $1.4299 in response.
Figures for the eurozone will be released at 10:00 a.m.
British time with the European Commission's Spring economic forecasts following
soon after.
"Those are fantastic figures yet again," Christian
Schulz at Berenberg Bank said of Germany's numbers. "Investments look to
have given a boost to the economy. Consumption will however become more and
more the engine of growth in the future, since unemployment is dropping
(markedly).
Analysts were a little more downbeat about France, saying
this was probably its high water mark, with government cuts about to bite.
"This is likely as good as it gets," said Joost
Beaumont, economist at ABN-AMRO. "The recent surge in oil prices is likely
to erode household purchasing power, while also eating into company profits, leaving
its mark on consumption and investment. Furthermore, we expect fiscal
retrenchment to increasingly come to the fore."
Italy bucked the trend, growing by just 0.1% in the first
quarter, below expectations and posting the same weak growth rate as the last
three months of 2010. The government predicts growth of just 1.1% this year.
Germany looks set to continue riding high, however.
A top economic advisor to the government, Wolfgang Franz,
told German TV channel ARD the country's economy could expand by 3% or more
this year.
For the debt-ridden members of the bloc, strong growth is a
distant dream.
Greek GDP data, due at 09:00, are forecast to show the
economy remains deep in recession while the Portuguese government has admitted
that, having sought a bailout, its economy will shrink both this year and next.
Portugal's data are due at the same time.
But Spain, seeking to persuade markets its prospects are
rosier than other parts of the eurozone periphery, saw its economy expand by
0.8% on an annual basis, its strongest growth since the second quarter of 2008.
On the quarter, growth was 0.3%.
IMF warning
Austria also put in a strong performance; its growth
accelerated to 1% in the first quarter from an upwardly revised 0.9% in the
fourth quarter thanks to booming exports, economic research institute WIFO
said.
The split nature of Europe's economies demonstrates the
difficulties facing the European Central Bank, which raised interest rates for
the first time in two years last month, and is expected to repeat the policy
dose soon.
The International Monetary Fund said on Thursday that the
debt crisis could yet spread to core nations in the single currency bloc.
Its latest report on Europe, the Fund said it was ready to
give Greece more aid if the country needed it and urged the ECB to take a
cautious approach to interest rate increases, adding the tactic of providing
limit-free liquidity to eurozone banks might need to be prolonged.
But with eurozone inflation at the highest since the
financial crisis sent the economy into a tailspin in late 2008, financial
markets expect the bank to look past the debt crisis and raise interest rates
again to 1.5% in July and a third time before the end of the year.