29 Apr 2016
Eurozone defies global turmoil in Q1 as growth surges to 0.6% q-o-q - ING
Bert Colijn, Senior Economist at ING, notes that the Eurozone economy astonishes in the first quarter as consumers and business do not let fear get in the way of production and spending.
Key Quotes
“The first months of the year were tumultuous with large stock market declines, growth concerns in the US, China and many emerging markets and plummeting confidence among businesses and consumers. Clearly, businesses and consumers have not acted on their gut feelings. While the US and UK are suffering from a strong dollar and a possible Brexit, the Eurozone saw a marked acceleration from 0.3% in Q4 2015 to 0.6% non-annualised in Q1.
Domestic strength in the Eurozone economy is key to current economic growth. This is mostly because of improvements in the job market. In March, unemployment declined by more than 200 thousand people in the Eurozone and the rate decreased from 10.4% to 10.2%.
Although this release is certainly encouraging, it remains to be seen whether this figure is not subject to substantial revision. The flash estimate that the BEA produces in the US gets frequently revised and this could be similar for Eurostat data just 29 days after the end of the quarter. For now, the picture is undoubtedly strong though.
While this new flash release of GDP by Eurostat does not provide country detail yet, some countries have released flash estimates as well. France and Spain both surprised on the upside with growth of 0.5% and 0.8% respectively. The labour market is proving to provide significant tailwind for growth as many people are returning to work boosting income and spending. Growth in France was mainly boosted by consumer spending, showing that the dip in French consumer confidence in Q1 did not result in weaker sales at the stores.
While growth surprised on the upside, inflation continues to disappoint in April. Headline inflation came in at -0.2%, but more worrying is the drop in core inflation to 0.8%. This means that for businesses the conclusion is that the cautious Eurozone expansion remains better on track than expected, but that this is not yet translating in price growth. The competition on margins is likely to continue for a while, although the oil price improvements are helping inflation prospects improve for the months ahead.”
Key Quotes
“The first months of the year were tumultuous with large stock market declines, growth concerns in the US, China and many emerging markets and plummeting confidence among businesses and consumers. Clearly, businesses and consumers have not acted on their gut feelings. While the US and UK are suffering from a strong dollar and a possible Brexit, the Eurozone saw a marked acceleration from 0.3% in Q4 2015 to 0.6% non-annualised in Q1.
Domestic strength in the Eurozone economy is key to current economic growth. This is mostly because of improvements in the job market. In March, unemployment declined by more than 200 thousand people in the Eurozone and the rate decreased from 10.4% to 10.2%.
Although this release is certainly encouraging, it remains to be seen whether this figure is not subject to substantial revision. The flash estimate that the BEA produces in the US gets frequently revised and this could be similar for Eurostat data just 29 days after the end of the quarter. For now, the picture is undoubtedly strong though.
While this new flash release of GDP by Eurostat does not provide country detail yet, some countries have released flash estimates as well. France and Spain both surprised on the upside with growth of 0.5% and 0.8% respectively. The labour market is proving to provide significant tailwind for growth as many people are returning to work boosting income and spending. Growth in France was mainly boosted by consumer spending, showing that the dip in French consumer confidence in Q1 did not result in weaker sales at the stores.
While growth surprised on the upside, inflation continues to disappoint in April. Headline inflation came in at -0.2%, but more worrying is the drop in core inflation to 0.8%. This means that for businesses the conclusion is that the cautious Eurozone expansion remains better on track than expected, but that this is not yet translating in price growth. The competition on margins is likely to continue for a while, although the oil price improvements are helping inflation prospects improve for the months ahead.”