Investment in Eurozone
Eurozone - Investment
Third estimate confirms growth sank to near seven-year low in Q4 2019
A third estimate confirmed that the Eurozone economy slowed sharply in the final quarter of last year, after growth picked up in the third quarter. GDP increased a seasonally-adjusted 0.1% in Q4 from the previous quarter, following Q3’s 0.3% increase, which represents the weakest expansion since Q4 2013, according to Eurostat. Compared with the same quarter of the previous year, seasonally-adjusted GDP expanded a revised 1.0% in Q4 (previously reported: +0.9% year-on-year), below Q3’s 1.3% increase and marking the slowest growth rate since Q4 2013. The fourth quarter’s result brings full-year growth for 2019 to 1.2%, down from 2018’s 1.9% expansion and marking the softest reading since 2013.
Household spending growth in Q4 decelerated abruptly to 0.1% over the previous quarter, from Q3’s 0.5%, amid plunging consumer confidence, political uncertainty and gloomy economic prospects. Moreover, government consumption growth halved (Q3: +0.3 qoq s.a.; Q3: +0.6% qoq s.a.) and destocking continued to subtract 0.1 percentage points from growth, as companies opted to lighten their warehouses amid feeble demand prospects. On the other hand, fixed investment rebounded (Q4: +4.2% quarter-on-quarter s.a.; Q3: -3.8% qoq s.a.), propelled by soaring fixed investment growth in Ireland.
The external sector dragged heavily on growth, after contributing to growth in the previous quarter. Exports lost some pace in Q4, amid global trade policy uncertainties and a weak industrial sector (Q4: +0.4% qoq s.a.; Q3: +0.6% qoq s.a.). Meanwhile, imports bounced back robustly (Q4: +2.2% qoq s.a.; Q3: -1.3% qoq s.a.), again due to surging purchases from abroad in Ireland.
In terms of specific countries, Italy contracted sizably in the fourth quarter (Q4: -0.3% qoq s.a.) and France’s economy also sank due to shrinking inventories (Q4: -0.1% qoq s.a.). Meanwhile, Germany’s economy flatlined, after having dodged a technical recession in the previous quarter, weighed down by a struggling industrial sector. In contrast, Spain gained some pace in the quarter, growing 0.5%, although a sharp contraction in capital spending and muted private consumption suggest the pick-up will be temporary.
Looking ahead, the Eurozone economy is expected to grow only modestly this year. Trade uncertainty and a weak global backdrop will restrain exports and hit investment and industrial activity. Moreover, cooling employment growth and higher savings are set to constrain household spending. Political uncertainty, the impact of coronavirus, U.S.-EU trade tensions and Brexit pose the main downside risks.
FocusEconomics Consensus Forecast panelists see the Eurozone economy expanding a soft 1.0% in 2020, which is unchanged from last month’s forecast, before edging up to 1.2% in 2021.
Eurozone - Investment Data
|Investment (annual variation in %)||1.7||4.5||4.0||3.7||2.4|
5 years of economic forecasts for more than 30 economic indicators.
|Exchange Rate||1.12||0.65 %||Dec 31|
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April 1, 2020
Sentiment in the Eurozone nosedived in March due to the blow of coronavirus, plunging to 94.5 points from February’s 103.4 points.
April 1, 2020
Harmonized inflation fell to 0.7% in March from February’s 1.2%, according to a flash estimate released by Eurostat on 31 March.
April 1, 2020
Labor market conditions in the common currency bloc strengthened in February, ahead of an inevitable worsening due to the pandemic, according to data released by Eurostat.
March 24, 2020
The Flash Eurozone Composite Purchasing Managers’ Index (PMI), produced by IHS Markit, nosedived from 51.6 in February to 31.4 in March, marking the worst result since data was first collected in July 1998—including the lows during the global financial crisis.
Eurozone: ECB to buy over EUR 1 trillion of Eurozone debt this year to counteract coronavirus fallout
March 19, 2020
On 18 March, at an extraordinary night meeting after borrowing costs for Southern European countries had jumped on mounting coronavirus (Covid-19) concerns, the European Central Bank (ECB) unexpectedly decided to step up its efforts to combat the economic and financial shockwaves currently shaking the Euro area.