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Life In The Old Dog Yet

Eurozone growth

Image source: Lukasz Pajor, sdecoret, Zuhurat Stock, ArtFamily - Shutterstock

What's going on?

Economic data out of Europe in 2019 hasn’t been great – with growth forecasts for the eurozone getting cut only a fortnight ago. But analysts at major investment banks now seem to think things could be looking up…

What does this mean?

According to Goldman Sachs, the most recent eurozone economic data has been a touch better than expected. And Morgan Stanley notes that things are also picking up in China. Europe is dependent on China as a market for its goods – so recent good news for Chinese manufacturing combined with the prospect of even more state support for the country’s economy spells good news for Europe too.

Analysts at Citigroup are also weighing in: their analysis of economic surprises for March so far shows the number of expectation-beating European economic datasets at a five-month high.

Why should I care?

For markets: Not bad, not good… not yet.

Goldman reckons eurozone growth will soon stabilize before improving in the second half of 2019. That’s thanks to low interest rates staying low for longer: cheaper access to cash usually means people borrow and spend more. And Goldman also expects that, come the second half of this year, the oil price will be cheaper than it was a year prior – so companies won’t be under a lot of pressure to increase prices. As Europeans’ wages are expected to grow, people should have even more incentive to make economy-boosting purchases.

Zooming out: America is holding its breath.

The US Federal Reserve will be issuing its latest update on the American economy on Wednesday. US interest rates will probably hold steady – and are unlikely to rise in 2019. In that context, any improvement in the eurozone relative to the US could encourage more investors to send their cash across the Atlantic, buying up both European stocks and the region’s currency (which is currently having a tough time of it).

Originally posted as part of the Finimize daily email.

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