< Back to News

European Exports, State Spending Lead Growth; Household Consumption Drops

Exports and government spending helped sustain Europe’s recovery in the first quarter, offsetting declines in company investment and household consumption.

Exports from the 16 nations using the euro increased 2.1 percent from the fourth quarter, when they rose 1.8 percent, while state spending increased 0.2 percent, the European Union’s statistics office in Luxembourg said today. Stockpiling also helped the economy, with changes in business inventories adding 1 percentage point to growth in the first quarter, when gross domestic product increased 0.2 percent, matching a June 4 estimate.

European exports have bolstered the economic expansion as rising unemployment prompted consumers to cut back spending. While the Greek debt crisis has pushed down the euro and made the region’s goods more competitive abroad, it also forced governments from Spain to Italy to step up deficit-cutting efforts, clouding the growth outlook. Expansion in Europe’s manufacturing industry slowed in June.

“The second quarter will definitely be significantly stronger,” said Carsten Brzeski, an economist at ING Group in Brussels. “The big question is what will happen in the year’s second half. The growth momentum could weaken but still no double dip overall.”

The euro was little changed against the dollar after the GDP data, trading at $1.2569 at 10:02 a.m. in London, down 0.5 percent on the day.

Business investment dropped 1.2 percent in the first quarter from the prior three months and consumer spending slipped 0.1 percent, today’s report showed. From a year earlier, first-quarter GDP expanded 0.6 percent, the first annual gain since the third quarter of 2008.