ez q1 2019 flash gdp review
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  • Quarterly, Annual Growth Rates Beat Consensus
  • Breathing Room For Rate-Setters


Frankfurt, 30 April (LS NEWS) – The Eurozone economy grew more than expected in the first quarter and the expansion in the final three months of 2018 was higher than previously reported. EUR/USD pushed through 1.20 earlier in the session and continued to move higher against the dollar following the release of the data.


According to preliminary estimates, Eurozone GDP grew at a quarterly rate of 0.4 in the first three months of the year to beat the market consensus of 0.3pct and the 0.2pct growth recorded in Q4 2018, the European union statistics office Eurostat said. The annual rate of Eurozone economic growth in the first quarter was 1.2pct versus the consensus of 1.1pct. Eurostat raised the annual growth rate for Q4 2018 to 1.2pct from 1.1pct.


The Eurozone data followed Tuesday’s release of Spanish and French GDP growth rates for the first quarter. Spain reported an annual increase of 2.4pct; France said its GDP grew at 1.1pct.


Italy reported an annual growth rate of 0.1pct after the Eurozone data was released.

Source: Eurostat
Source: Eurostat

A Sigh Of Relief In Frankfurt?

Danske Bank Research Senior Analyst Aila Mihr tweeted: “Good day for ECB, as GDP figure is above their latest projection (0.2pct in Q1) and reduces the probability for further easing measures from ECB ahead.”


Last month, the European Central Bank cut its forecasts for Eurozone growth, with GDP expansion expectations for this year slashed to 1.1pct from December’s estimate of 1.9pct. With the March forecasts in hand, rate-setters promptly surprised the market by announcing plans to hold interest rates at currently levels for at least the remainder of this year.


In a note, ING Economist Peter Vanden Houte said, “Today’s figures probably haven’t made the European Central Bank any wiser. The economy remains solid enough not to need extra stimulus. But at the same time not much has to go wrong to bring GDP growth to a standstill. In that regard, wait-and-see remains the most likely ECB monetary policy stance.”


ECB President Mario Draghi said the meeting of the bank’s governing council earlier this month “was one where the main goal was to reassert the readiness to act if the contingency warranted”, suggesting economic data will be the catalyst for any further adjustments to forward guidance and monetary policy.


In a note, Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics said: “Assuming no revisions, this EZ headline is in line with our main story. Full-year growth will slow significantly this year, to just over 1.0pct, but that’s primarily due to a weaker statistical carry-over effect from a slow finish to 2018. The growth profile in the first half of the year should be significantly better than in the second half of last year, and today’s data provide strong evidence to that point.”


Vistesen said results from recent polls of European managers may be misrepresenting the true economic picture. “These data [...] make a mockery of the key survey data, which still appear to be very, (too?), sensitive to the slowdown in manufacturing.” 


--- Eric Culp

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