Eurozone stumbles through Q4 2018
A third estimate confirmed that the Eurozone economy remained weak through the fourth quarter of last year. According to Eurostat on 7 March, GDP increased a seasonally-adjusted 0.2% in Q4 from the previous quarter, just beating Q3’s revised 0.1% increase (previously reported: +0.2% quarter-on-quarter s.a.) which had marked the slowest growth rate since Q1 2013. That said, Q4’s reading matched earlier estimates.
Domestic demand was confirmed to have lost momentum. Household spending growth was unremarkable at 0.2% (Q3: +0.1% qoq s.a.), in line with dwindling economic sentiment and despite the tight labor market and lower inflation. Government spending growth, meanwhile, shot up to 0.7% (Q3: +0.1% qoq s.a.). Fixed investment increased 0.6%, as in the third quarter, again beset by concerns over political woes at home and trade flows abroad. Inventories ate into growth substantially.
The external sector fared a little better. Export growth jumped to 0.9% (Q3: +0.2% qoq s.a.) despite hiccups in the industrial sector. Import growth, on the other hand, slowed to 0.5% (Q3: +1.1% qoq s.a.). Taken together, it contributed marginally to growth, improving on the third quarter.
Compared with the same quarter of 2017, seasonally-adjusted GDP growth in Q4 was revised down to 1.1% (previously reported: +1.2% year-on-year s.a.), down from Q3’s 1.6%.
Accordingly, full-year growth slowed to 1.8% in 2018, from 2017’s robust 2.4%.
Commenting on the same-day release of the European Central Bank’s newest economic forecasts, Carsten Brzeski, chief economist at ING Germany, noted:
“[The] ECB has finally arrived in the Eurozone’s new reality of elevated uncertainty and downward revisions to growth expectations. This is not really surprising, given that the ECB’s growth forecasts from last December have always looked very optimistic. In today’s meeting, the ECB made clear that it still sticks to a rather optimistic base case scenario of a gradual recovery mainly on the back of solid domestic demand. At the same time, however, the slowdown, mainly stemming from temporary and country-specific factors, ‘is turning out to be somewhat longer-lasting.’”