Complete data confirms slowdown in Q1
The third estimate of GDP for the first quarter released by Eurostat confirmed that the economy started 2018 on a soft note. GDP increased a seasonally-adjusted 0.4% in Q1 over the previous quarter, below Q4’s 0.7% buoyant growth and matching both preliminary estimates. The first-quarter result marked the slowest growth since Q3 2016.
The external sector was chiefly behind the slowdown, dragging on activity in the first quarter. Exports fell 0.4% over the previous quarter, weighed down by a strong euro (Q4: +2.2% quarter-on-quarter). Import growth also contracted, falling 0.1% (Q4: +1.5% qoq) and representing cooler demand in the domestic economy.
Meanwhile, internal dynamics were mixed in the first quarter. Private consumption growth picked up, while fixed investment lost steam. Private consumption, the engine of the economy, expanded 0.5% quarter-on-quarter in Q1 (Q4: +0.2% quarter-on-quarter), supported by tightening labor market conditions and low inflation. However, government spending stalled in the first quarter, recording zero growth, while fixed investment grew 0.5%, notably down from Q4’s 1.3% increase. Economic sentiment waned towards the end of the quarter, and several one off-factors such as the early timing of Easter and weather conditions also likely impacted the result.
Finland and Latvia were the region’s star performers in the first quarter, growing above 1.0% quarter-on-quarter. On the other hand, Estonia was the only economy to see activity fall, with GDP decreasing 0.1%. Among the region’s heavyweights, growth waned in France, Germany and Italy, but it was steady in Spain. On an annual basis, GDP growth in the Euro area edged down to 2.5% in Q1, below Q4’s 2.8%.