Eurozone Recovery Wilts as Sugar Rush Fades, Deflation Lurks

The German industrial engine of Europe is not firing on all cylinders

by Ambrose Evans-Pritchard

The eurozone’s short-lived recovery is already losing steam as stimulus fades and deep problems resurface, raising fears of yet another false dawn and a potential deflation trap if there is any external shock over coming months.

Industrial output fell in 1.3pc Germany and 0.3pc in France in March as manufacturing stalled, confounding expectations for robust expansion. The relapse in a string of countries suggests that flash estimates of 0.6pc GDP growth in the first quarter were too optimistic and may have to be cut.

“The recovery is not gaining any traction. I am really quite worried about another spasm of the debt crisis over the summer,” said Lars Christensen from Markets and Money Advisory.

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