Construction drives first quarter gains in Eurozone

Construction across the 19 countries that share the euro rose in March and in the first quarter as a whole, an indication that businesses and households are becoming more willing to invest after years of caution, MarketWatch reported this morning

The European Union’s statistics agency said last week that the eurozone economy grew at a quarter-to-quarter pace of 0.4 per cent in the first three months of the year, a slight acceleration from the final three months of 2014.

Figures released by Eurostat on Wednesday suggest construction helped boost growth during that period, recording a 0.8 per cent rise in March from February, and a 0.3 per cent increase between the fourth quarter of last year and the first of this.

It marks the first quarter-on-quarter rise since the first three months of last year, although that proved a false dawn. Indeed, construction in the first three months of the year was 0.5 per cent lower than in the same period of 2014.

Policy makers see weak investment as a key impediment to a faster recovery in the Eurozone, and fear that years of low growth as the financial crisis morphed into the eurozone’s own debt crisis has made businesses and households less willing to take risks and embark on long-term projects.

The European Central Bank has repeatedly said that while it can support economic activity and try to boost inflation through its stimulus programs, a pickup in investment requires actions by governments to liberalize labor and product markets and improve the environment for businesses by cutting taxes and regulation.

“I think it’s very late because after seven years this more pessimistic environment becomes more entrenched in expectations, so you need to have results now,” European Central Bank executive board member Peter Praet said in an interview with The Wall Street Journal on Monday.

The European Union has launched the Investment Plan for Europe, which is aimed at using limited public funds to attract private sector money to the construction and repair of roads, railways and other parts of the bloc’s decaying infrastructure. And with economic growth beginning to pick up, bank lending more readily available, and equity markets surging, there are signs that businesses are preparing to shed some of their caution.