This is not a sentence you have seen very often over the past four years: the eurozone economy's pace of growth overtook both the U.S. and the U.K. in the first quarter. The single European currency area hasn't seen such performance since the first quarter of 2011, so it is quite an achievement.
The eurozone economy advanced by 0.4% in the first quarter from the fourth, up from the fourth quarter's 0.3% rate of expansion. The two biggest economies, Germany and France, both advanced, although surprisingly France's grew much more quickly than Germany's. German GDP increased by a modest 0.3%, while France managed a solid 0.6% gain.
Spanish figures, released earlier, showed 0.9% growth, while Italy advanced by 0.3% in the first quarter. The Dutch economy expanded by 0.4%, as did Portugal's.
A breakdown of the figures has not been published yet, but various other indicators seem to point to increased domestic consumption due to the weaker euro and lower oil prices as the main driver of growth.
It is very possible that this indicates that the single currency area's recovery is on firmer footing, but you should not open the champagne just yet (unless, of course, you want to support the noble case of boosting sales of French goods).
"The jury is still out whether eurozone growth has reached enough escape velocity to see a self-sustained recovery, as the first confidence indicators for the second quarter leveled off a bit, now that oil prices have increased and the euro exchange rate strengthened," ING Bank's eurozone economist Peter Vanden Houte warned.
Other data, such as the composite PMI, could indicate that the pace of recovery has already flattened out, possibly reflecting the negative effects of the protracted negotiations over Greece's fate, said Jonathan Loynes, chief European economist at Capital Economics. The link between PMI and eurozone GDP growth has been particularly strong lately.
Source: Capital Economics
Germany, the eurozone's biggest economy, disappointed a little, as its growth slowed down from the fourth quarter's 0.7% quarterly pace. Year on year, the advance also slowed to 1.1% from the fourth quarter's 1.6% growth.
On the positive side, Germans are finally beginning to ramp up their consumption, encouraged by more job security (with unemployment around record lows), higher salaries, the boost from lower oil prices and low interest rates.
The worrying aspect is that this could be it for the German economy. Carsten Brzeski, an analyst with ING (ING), has identified at least three missing links for a stronger recovery: the labor market, investment and public finances.
Without structural reforms, the German labor market "seems to have reached a level of full employment," while investment has been weak as industrial production -- with the exception of the construction sector -- "has moved rather horizontally for almost four years," he noted.
As for the public finances, the persistently strong reining in of public spending is a good thing for the future as the population is aging, but for the present, and at the current low level of interest rates, it does nothing to tackle weak investment.
With France and Spain overtaking Germany's pace of growth and Italy matching it, hopes that the laggards are catching up are increasing. But in those countries, the problem is structural reform, and this will take time.
Analysts at Societe Generale have taken a look at how France, Spain and Italy fare compared with the average of the three best-performing countries in the European Union on various indicators of how flexible and efficient their economies are, and they are still far behind.
For example, the employment participation rate is 79.6% in the three best-performing EU economies, but just 64% in Italy, 71% in France and 75.3% in Spain.
What is perhaps most telling is the share of highly skilled workers to the total workforce: In the top three EU countries it is 11.2%, but it's just 4.2% in Italy, 8.5% in France and 9.8% in Spain.
Despite this, the stock strategists at Societe Generale believe it is time investors went short German stocks and long French ones. The German stock market index, the DAX, is up nearly 17% over the past year compared with an advance of 10% for the French CAC, but Societe Generale's European equity strategist, Roland Kaloyan, said the French equity market should benefit more from better economic momentum thanks to ongoing reforms.
He has buy ratings on French infrastructure firm Vinci (VCISY), car maker Renault (RNLSY), bank Credit Agricole (CRARF) and hotel group Accor (ACRFF). In Germany, he has sell ratings on Deutsche Bank (DB), utility group RWE (RWEOY) and insurer Munich RE.