Drag in euro zone recovery supports call for ECB action

By Martin Santa

BRUSSELS (Reuters) - A slowdown in the euro zone's economic recovery in the first quarter was confirmed on Wednesday, likely reinforcing calls for bold action by the European Central Bank this week to fight low inflation and high unemployment.

The 18-nation bloc's economy expanded by just 0.2 percent in the three months to March, the EU's statistics office Eurostat said, illustrating the fragility of the rebound.

Analysts surveyed by Reuters expected the 9.5 trillion euro economy to expand by 0.4 percent on the quarter in the January to March period.

Euro zone inflation has been stuck in the European Central Bank's 'danger zone' of below 1 percent since October and coupled with weak growth poses a risk for the recovery.

Growth in the first quarter rise was mainly due to Germany, which compensated the stagnation in France and the shrinking output in Italy, the Netherlands, Portugal and Finland.

The quarterly rise was driven mainly by change in inventories, along with domestic and government consumption and exports. Imports did little to help the economy.

When compared with the same period of last year, the economy grew by 0.9 percent, its second consecutive annual expansion after a 0.5 percent increase in the last quarter of 2013.

Germany, the euro zone's largest economy, grew by a sound 0.8 percent in the first quarter, with economists expecting pace of the expansion to slow in the coming months.

ECB policymakers have flagged a policy move for their meeting on Thursday and the bank's president, Mario Draghi, said last week the ECB was well equipped to get inflation back to its target - just below 2 percent. [ID:nL6N0OD4AG]

Separately, Eurostat data showed that industrial producer prices, a proxy for consumer price inflation, fell as expected both on the month and year on year in April.

Prices at factory gates in the euro zone slid 0.1 percent on the month in April after a 0.2 percent drop in March, showing the fourth consecutive monthly decline in a row.

Out of the bloc's five largest economies, Germany, France, Italy, Spain and the Netherlands, it was only Madrid seeing prices going up month-on-month by 0.2 percent.

When compared with the same period last year, producer prices fell by 1.2 percent in April, slowing from a 1.6 percent drop in March.

(Reporting by Martin Santa; editing by Robin Emmott)