Eurozone: Growth halves in Q2, providing ammunition for ECB action
August 14, 2019
A second preliminary estimate reaffirmed that the Eurozone economy slowed in the second quarter of 2019, likely weighed on by a weak manufacturing sector and uncertainty. According to Eurostat, GDP increased a seasonally-adjusted 0.2% in Q2 from the previous quarter, halving from Q1’s 0.4% and matching the first flash estimate. Compared with the same quarter of the previous year, seasonally-adjusted GDP expanded 1.1% in Q2, a notch below Q1’s 1.2% increase and marking the slowest growth rate since Q4 2013.
The result confirms that the Eurozone economy seems set to slow notably this year, likely weighed on by a weak industrial sector and amid a less supportive global trade environment. While a full breakdown by components is not yet available, higher frequency data suggest a two-speed economy, with healthy services sector activity somewhat offsetting weak manufacturing sector data. The manufacturing PMI recorded its worst quarter since early 2013 in Q2; however, the unemployment rate fell to a fresh over one-decade low in June. Moreover, the soft GDP print, combined with low inflation, will likely translate into stimulus action by the ECB at its September meeting to shore up the outlook.
Additional data released by national statistical institutes across the Eurozone was also downbeat. Germany’s economy contracted 0.1% quarter-on-quarter as trade tensions hampered its export-focused manufacturing sector Moreover, Italy’s economy stagnated in the second quarter; France’s economy lost steam on slumping household spending; and Spain’s growth decelerated, although its economy continued to outperform most of its peers nonetheless.
More comprehensive results for the second quarter are scheduled to be released on 6 September and 21 October.