Snapshot - Managers' views

Eurozone growth rebounds as temporary headwinds fade

The latest GDP figures show that domestic demand has remained resilient.

03/05/2019

Azad Zangana

Azad Zangana

Senior European Economist and Strategist

  • Eurozone GDP growth accelerated to 0.4% in the first quarter of 2019, relieving fears of recession.
  • External demand and political uncertainty remain possible headwinds but domestic demand has held up well.

The early estimate for first quarter eurozone GDP growth showed a pick-up to 0.4% quarter-on-quarter (q/q) from 0.1% in the previous quarter – beating consensus expectations of 0.3% growth.

The latest data release suggests that the monetary union has largely sailed through most of the temporary headwinds that it faced in the second half of 2018. Gilets jaunes protests, new car emissions tests, and low water levels of the river Rhine all disrupted activity last year and caused growth to slow sharply.

While there are some residual effects remaining, the latest figures should also put to bed speculation that the eurozone was in recession, and supports the strong performance of European equities so far this year.

Within the member states that have reported so far, France saw activity remaining steady at 0.3% q/q, although it reported better domestic demand growth thanks to a pick-up in household spending. Spain recorded another impressive quarter, as GDP growth picked up from 0.6% to 0.7%, also marginally better than consensus expectations. Finally, Italy saw a moderate rebound, as growth picked up from -0.1% at the end of last year to 0.2% in the first quarter, also beating consensus expectations. 

Overall, these are a good set of growth figures given recent events. External demand is likely to have remained weak as the fallout from the US-China trade tension continues. European political uncertainty in the form of the Spanish elections, Brexit and European parliamentary elections probably had a small negative impact, but domestic demand has remained resilient throughout this period.

 

Important Information
Any security(s) mentioned above is for illustrative purpose only, not a recommendation to invest or divest.
This document is intended to be for information purposes only and it is not intended as promotional material in any respect. The views and opinions contained herein are those of the author(s), and do not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. The material is not intended to provide, and should not be relied on for investment advice or recommendation. Opinions stated are matters of judgment, which may change. Information herein is believed to be reliable, but Schroder Investment Management (Hong Kong) Limited does not warrant its completeness or accuracy.
Investment involves risks. Past performance and any forecasts are not necessarily a guide to future or likely performance. You should remember that the value of investments can go down as well as up and is not guaranteed. Exchange rate changes may cause the value of the overseas investments to rise or fall. For risks associated with investment in securities in emerging and less developed markets, please refer to the relevant offering document.
The information contained in this document is provided for information purpose only and does not constitute any solicitation and offering of investment products. Potential investors should be aware that such investments involve market risk and should be regarded as long-term investments.
Derivatives carry a high degree of risk and should only be considered by sophisticated investors.
This material, including the website, has not been reviewed by the SFC. Issued by Schroder Investment Management (Hong Kong) Limited.