Eurozone Cools Heading Into Spring


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What's going on?

Womp. Growth in the eurozone slowed down during the first quarter of this year, according to data out on Wednesday – which is kind of the equivalent of a bucket of ice water being poured over that so-called Euroboom

What does this mean?

Annualized economic growth in the eurozone (as measured by changes in GDP) totaled 2.5% in the first quarter, a drop from the 2.8% growth seen in the last quarter of 2017. While some previous data (including manufacturing activity) had suggested the growth rate was likely to slow down, it’s still the slowest since almost two years ago, when – relatively speaking – eurozone economies were hotter than a two-dollar pistol.

That may be partly down to an unseasonably cold winter coupled with several big strikes, meaning that people and companies in Europe spent less during the first three months of the year.

Why should I care?

For markets: Investors will be watching the reaction of the European Central Bank (ECB).

For some years now, the ECB has engaged in a major bond-buying program known as quantitative easing in a bid to stimulate the economy. As the eurozone economy has improved in recent years, the ECB has started to reduce these bond purchases – which may be premature, if the economy’s growth is slowing. If economic growth slips too much, it would make it harder for the ECB to justify keeping on scaling things back – but the ECB is yet to show any signs of changing course.

The bigger picture: EU ain’t alone, Charlie…

While the eurozone’s growth has slowed, it’s still doing better on an annual basis than the United States (as well as Britain, which recently registered its weakest economic growth since 2012). As in the eurozone, US economic growth decelerated in the first quarter of 2017; a puzzling result, as big tax cuts were expected to unlock explosive economic growth in 2018. When in doubt, blame the weather.

Originally posted as part of the Finimize daily email.

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