Fra ABN Amro:
Why the eurozone economy will likely slow again
Euro Macro: Stronger Q1 growth unlikely to be sustained – Eurozone GDP growth strengthened to 0.4% qoq in 2019Q1, up from 0.2% in 2018Q4. The outcome was stronger than the consensus and our own forecast. No details of growth have been reported yet at the eurozone level, but monthly economic data and detailed Q1 GDP data from some individual countries suggest that the strength (as was expected) was concentrated in private consumption, particularly in car sales. Indeed, new car registrations bounced back sharply in Q1 (+7.5% qoq) after they had collapsed in the second half of 2018 (-11.4% qoq in Q4) due to temporary distortions from the introduction of new emission standards.
Also France (GDP growth at 0.3% in Q1, the same as in Q4) reported a rise in private consumption growth to 0.4% qoq in Q1 from 0.0% in Q4. Finally, Italy (GDP growth to 0.2% from -0.1%) reported a rise in new car registrations by almost 30% qoq in Q1, while final domestic demand actually contracted.
We think the temporary shift in car sales was responsible for around 0.2pps extra GDP growth in Q1 in the eurozone in total (around 0.3pps in Italy alone). That said, monthly changes in car registrations suggest that the rebound in Q1 will likely be followed by contraction in Q2, as sales declined both in February and in March, implying a negative spill-over into Q2.
In contrast to private consumption, fixed investment in machinery and equipment probably slowed down in Q1, although growth in residential investment seems to have remained strong. Indeed, orders for German capital goods by other eurozone countries fell by 4.5% 3Mo3M in February, which bodes ill for fixed investment growth in Q1.
Finally, growth in exports weakened significantly in France (to 0.1% qoq in Q1, from +2.2% in Q4) and Spain (to -0.5% from +0.7%). Belgium (GDP growth at 0.2% qoq in Q1, down from 0.4% in Q4), did not report any details of growth, but considering the economy’s large exposure to foreign trade, it seems that declining exports played some part in the weakening of growth.
Looking forward, we expect growth to slow down again in Q2, as private consumption growth should weaken while exports and investment are expected to remain sluggish on the back of still lacklustre world trade growth. Only later this year, we do expect a more sustainable rise in GDP growth to around the trend rate (of around 0.3-0.4% qoq) due to a moderate improvement in global trade growth.
