Eurozone: Economy stutters in Q4
January 31, 2019
The Eurozone economy remained weak in the final quarter of last year, failing to gain ground after the third quarter’s slowdown. According to a preliminary estimate released by Eurostat, GDP increased a seasonally-adjusted 0.2% in Q4 from the previous quarter, matching Q3’s result which had marked the slowest growth rate since Q2 2014. The reading was slightly below the 0.3% increase expected by analysts. Compared with the same quarter of 2017, seasonally-adjusted GDP expanded 1.2% in Q4, down from Q3’s 1.6%. Accordingly, growth slowed to 1.8% in 2018, from 2017’s robust 2.5%.
The downbeat result confirms that the Eurozone economy has lost momentum, and that Q3’s weak reading was not a one-off as initially believed. While a breakdown by components is not yet available, soft domestic dynamics likely weighed on growth in the fourth quarter. The Eurozone’s industrial sector is expected to have floundered, amid a discouraging recovery in automobile production after the implementation of new emissions tests. Moreover, economic sentiment dropped notably in Q4, likely reflecting the uncertain geopolitical environment.
Additional data released by national statistical institutes across the Eurozone was mixed. Italy’s economy slipped into technical recession in Q4, due to weak performances by the industrial and agricultural sectors. That said, growth in France managed to hold up—unchanged from the previous period despite the ‘yellow vest’ protests thanks to solid exports—and Spain continued to grow at an impressive clip.
As a result, the Eurozone economy entered 2019 on a weak footing after a disappointing 2018. Early data for the new year has stayed soft, with the composite PMI and economic sentiment both falling again in January. Combined with a troubling political landscape amid global trade tensions and Brexit, downside risks to the outlook appear to be intensifying.
Eurozone GDP Forecast
FocusEconomics Consensus Forecast panelists expect the Euro-area economy to expand 1.5% in 2019, which is down 0.1 percentage points from last month’s forecast. For 2020, panelists see the economy again expanding 1.5%.