Eurozone GDP slows as expected in Q1
Economic growth in the eurozone slowed in the first quarter, according to a preliminary estimate released by Eurostat on Wednesday.
Seasonally-adjusted gross domestic product rose by 0.4%, down from 0.7% in the final quarter of last year but in line with expectations.
Year-over-year, meanwhile, the growth rate slowed to 2.5% from 2.8%, also in line with consensus expectations.
In the EU-28 group of nations, first-quarter GDP was also up 0.4%, following a 0.6% rise the previous quarter. Year-over-year, the rate slowed to 2.4% from 2.7%.
Stephen Brown, European economist at Capital Economics, said: "There is no eurozone GDP breakdown yet, but national evidence suggests that the contribution from net trade dropped sharply in Q1. Investment growth appears to have remained healthy while consumer spending growth was probably very subdued for the second quarter running. That’s despite further improvements in the labour market, with other data released today revealing that eurozone unemployment fell further in March, albeit not by enough to push the unemployment rate down from February’s post-crisis low of 8.5%.
"Temporary factors, including unseasonably-cold weather, striking workers, short-term bottlenecks and even an outbreak of the flu, appear to have weighed on GDP growth in Q1. But there is no denying that underlying growth has slowed as last year’s boost from net trade has faded. Given the high level of consumer confidence, we suspect that consumption growth will pick up in Q2 and help to push quarterly GDP growth back to around 0.5% or 0.6%. This underscores our forecast for annual growth to slow only slightly this year from 2017’s 2.4% to 2.3%."
Berenberg analyst Florian Hense said the question is whether this is just a blip or the beginning of a more pronounced cyclical slowdown.
"The truth probably lies somewhere in between. The ECB stressed last week that the underlying momentum of the eurozone expansion remains strong and supports a gradual convergence of the currently subdued price pressures to an inflation rate more to their liking. We agree and expect the ECB to wait for a evidence that growth will regain a little extra momentum over the next months before they take any major further step towards the exit from their current policy stance."