Fra Commerzbank:
Euro zone: How strong was growth in Q1? In the coming week we will find out how the euro zone economy started the year 2015. Sentiment indicators are pointing to much stronger growth compared to the final quarter of 2014 (0.3%). But hard data confirms this only in part. For this reason we expect Q1 2015 GDP growth to amount to “only” 0.4% versus Q4 2014. The growth differentials between the large euro zone countries have probably narrowed considerably. In the US, retail sales and industrial production should point to an improvement in economic activity in April.
The euro zone economy enjoyed strong tailwinds at the beginning of the year. Firstly, consumer and business finances felt noticeable relief from plummeting oil prices. Secondly, the strong depreciation of the euro has given a substantial boost to the price competitiveness of companies producing in the euro zone. And last but not least, the construction sector profited from the unusually mild winter weather. All this in itself argues for a large increase in real GDP, which is also signalled by much-improved sentiment indicators. But hard data advises caution. Accordingly, we assume that the euro zone economy expanded in Q1 by “only” 0.4% versus the final quarter of 2014 (consensus: 0.4%, chart 9).
Compared to the growth rate of 0.3% in Q4 2014 and given the favourable framework conditions, that would be a fairly modest acceleration in growth. This would support our thesis that the high levels of private debt and the as-yetuncorrected distortions in the property markets of several countries are preventing a stronger upturn in the euro zone. The growth differentials between the large euro countries likely narrowed considerably at the start of the year (chart 10). For Germany, we expect a growth rate of 0.3% (consensus: 0.5%), closely followed by France with 0.3% and Italy with 0.2%. USA: Revival in April After the slow growth in Q1, all eyes are on US data for April.
We expect to see moderately positive figures next week. Retail sales are expected to have risen 0.2% on March (consensus: 0.3%). But these figures understate the situation, because petrol prices declined last month if we disregard seasonal fluctuations which depressed nominal sales. We also forecast a slight gain of 0.1% in industrial production (consensus: 0.1%). In the manufacturing sector, the ISM index held at 51.5 in April and thus remains in expansionary territory, and its production component even rose 2.2 points to 56.0. It is likely, however, that mining output declined again due to the relatively low oil price
