Europe Jumps Low Bar

Eurozone GDP beats forecasts

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What's going on?

Fresh data released on Tuesday showed that the eurozone economy grew 1.2% larger in the first quarter than it was a year ago – a low figure that was still higher than predicted.

What does this mean?

The 19 euro-using countries have had a tough start to 2019. Manufacturing in Europe’s biggest economy, Germany, all but ground to a halt thanks to disruptions plaguing its crucial auto industry; the French economy was brûléed by ongoing protests; and Italy succumbed to a dreaded recession. Economists accordingly slashed their growth forecasts left and right – and the European Central Bank said it’d start offering commercial banks a fresh round of cheap long-term loans from September, hoping to get some money moving around and grow the economy.

But economic growth already started accelerating last quarter, with Italy expanding all of 0.1% and thus escaping recession. Investors will be breathing a sigh of relief – and wondering whether monthly surveys are as reliable as they’d thought.

Why should I care?

For markets: China giveth, China taketh away.

The eurozone’s better-than-expected economic growth last quarter might not have been a surprise to those looking east: China’s first-quarter economic growth surpassed predictions too. With an estimated 35% impact on the well-being of the eurozone economy (and 15% on the US’s), a rising Chinese sun should mean fair weather for Europe too. But new Chinese data suggests it may have been a false dawn.

The bigger picture: Our survey says… manufractured.

Two closely watched surveys of Chinese manufacturing activity on Tuesday showed that the country’s strong first quarter was followed by a flimsier April. According to both reports, manufacturing activity barely grew – confounding expectations that government support would maintain momentum. US-China trade negotiations are currently on the home straight, and it’s likely that both countries are watching one another’s economic data for any signs of weakness. That said, Europe just proved survey data isn’t the be-all and end-all…

Originally posted as part of the Finimize daily email.

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