Euro area Q1 GDP reinforces belief ECB to shift guidance in June

The Eurozone economy maintained a steady rate of expansion at the start of the year, which economists said confirmed the confident note on growth sounded by the European Central Bank the week before.

Gross domestic product in the single currency bloc grew at a 0.5% quarter-on-quater clip during the first three months of 2017, according to a preliminary estimate published by Eurostat.

That was unchanged from the upwardly revised print of 0.5% for the prior three months.

GDP was initially estimated to have grown by 0.4% in the fourth quarter of 2016.

In comparison to a year ago, the rate of expansion in GDP slipped from 1.8% to 1.7%.

No breakdown of GDP by components was provided.

Economic growth in the wider European Union on the other hand moved down a notch, increasing by 0.4% quarter-on-quarter after a short-lived spurt of 0.6% over the prior three months. Yet the year-on-year rate of growth was unchanged at 1.9%.

Dr. Howard Archer, chief European+UK economist at IHS Markit, says there is now a "genuine chance" that euro area GDP will grow closer to 2.0% this year, ahead of the 1.7% pace expected by his research group.

"Certainly, the risks to our 2017 GDP growth forecast of 1.7% look increasingly slanted to the upside. [...] The healthy first-quarter Eurozone growth performance reinforces belief that the ECB will likely drop the reference to lower interest rates in its forward guidance at its June meeting."