Austria: Domestic demand keeps economic growth steady in Q1
The economy kept pace in the first quarter of 2019 according to a preliminary release, growing 0.3% over the previous quarter and matching the result of the fourth quarter. Compared with the same period in 2018, however, growth moderated noticeably to 1.1% in Q1, from 2.4% in Q4, as less working days in the quarter weighed on the reading.
Quarter-on-quarter growth was chiefly driven by domestic demand, while the external sector barely contributed to growth. Specifically, private consumption and investment were the main engines of growth; meanwhile, public expenditure growth slowed a tad. Private consumption expanded 0.4% quarter-on-quarter (Q4: +0.4% quarter-on-quarter), supported by easing inflation and despite upward trending unemployment and a drop in retail sales. Moreover, the marked fall in retail sales in March suggests this was likely linked to most Easter holidays falling in April this year. Fixed investments, meanwhile, increased 0.6% qoq, matching the growth rate of the prior quarter, and government consumption expanded 0.4% over the previous quarter, down from 0.5% in the fourth quarter.
In contrast, the external sector hardly contributed to economic growth as exports slowed: Exports of goods and services increased 0.4% over the prior quarter (Q4: +0.6% qoq), while goods and services imports rose 0.4% qoq, down from a 0.6% expansion in the previous quarter.
Going forward, the Austrian economy is expected to grow at a noticeably softer pace this year than in 2018. The moderating pace of growth, however, is in line with easing global and European economic momentum. Domestically, private consumption and fiscal expansion should provide stimulus, while headwinds mainly stem from the external environment. Downside risks include a hard or disorderly Brexit, and lingering trade tensions between the U.S. and China, and between the U.S. and EU.