Euro zone growth downgraded but employment holding up

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FRANKFURT (Reuters) -The euro zone economy grew slower in the first quarter than initially estimated but employment held up well, indicating that the bloc keeps creating jobs despite years of anaemic expansion, data from Eurostat showed on Thursday.

Gross domestic product in the first three months grew by 0.3%, below an initial estimate for 0.4%, but that was still an improvement on previous quarter as industry finally expanded and employment growth also picked up.

Compared with a year earlier, the bloc’s economy expanded by 1.2%, the same as three months earlier, broadly in line with what the ECB considers the bloc’s potential.

While the euro zone has consistently underperformed the U.S. in recent years, the 0.3% quarterly growth rate is far better than the 0.3% contraction reported in the U.S., which in great part was a reflection of surging imports ahead of tariffs.

Euro zone employment, meanwhile, expanded by 0.3% compared with the previous quarter, the highest figure in four quarters, likely easing fears that weak growth could finally prompt firms to start shedding workers.

Unemployment has been holding at record lows all year, confounding some expectations that, with no prospect for a meaningful rebound in growth, firms could reassess their plans to keep hanging on to workers.

Among the bloc’s biggest economies, Germany grew by 0.2%, France by 0.1%, Italy by 0.3% and Spain by 0.6% compared to the previous quarter.

(Reporting by Balazs Koranyi; Editing by Alex Richardson)