Growth doubles at start of 2019
The Eurozone economy picked up more than expected in the first quarter of the year, after suffering a sharp slowdown in the second half of 2018. According to a preliminary estimate released by Eurostat, GDP increased a seasonally-adjusted 0.4% in Q1 from the previous quarter, doubling Q4 2018’s 0.2% expansion and slightly above the 0.3% increase expected by analysts. Compared with the same quarter of the previous year, seasonally-adjusted GDP expanded 1.2% in Q1, matching Q4’s reading.
The positive result is encouraging for the Eurozone economy, which slowed sharply last year on problems in the industrial sector and amid a less supportive global trade environment. While a full breakdown by components is not yet available, solid household spending supported by a low unemployment rate and rising wages likely drove the result. In addition, an improved performance by the manufacturing sector as one-off issues fade likely helped, while a milder-than-usual winter may have boosted the construction sector.
Additional data released by national statistical institutes across the Eurozone was mostly positive. Italy’s economy exited recession in Q1 and Spain’s economy likely continued to outperform most of its peers. However, growth in France was stable from a quarter earlier but failed to record a stronger comeback given ‘gilet jaunes’-related setbacks to, most notably, household spending.
Commenting on the GDP release, Peter Vanden Houte, chief economist for the Eurozone at ING, elaborates:
“The recovery is getting old and no one should expect from a greybeard that he will continue to run at the pace he could achieve in his youth. And indeed, the elderly are also more vulnerable to shocks. While there are still a number of risks […] the improving international picture is likely to support eurozone exports in the coming months. In a number of eurozone countries, fiscal policy is also somewhat looser which is likely to underpin household consumption. In that regard, GDP growth should hover around 0.3% in the remainder of the year.”
More comprehensive results for the first quarter are scheduled to be released on 15 May and 6 June.