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15 May 2014
Multi-speed Eurozone: German economy the strongest performer while France stalls and Italy contracts
FXStreet (Łódź) - Eurozone Member States' preliminary GDP data for the first quarter of the year released today was mixed with Germany enjoying the strongest growth, while the performance of other large economies such as France, Italy or the Netherlands disappointed.
Germany's GDP was reported increasing by 0.8% in Q1, up from the 0.4% rise in Q4 and above expectations of climbing 0.7%. As Caroline Newhouse, Senior economist at BNP Paribas notes, “domestic demand contributed positively to GDP growth, while net trade had a negative effect. This is good news as a more equilibrated growth will help Germany better cope with a deceleration in its main trading partners’ activity.”
French numbers showed the country stagnating in the first quarter, due to a drop in consumer spending, while Italy, Finland and the Netherlands contracted, by 0.1%, 0.4% and 1.4%, respectively. The shocking Dutch result was attributed a a sharp fall in natural gas consumption due to this year's warm winter.
Among the countries under austerity programs, Portugal contracted by 0.7%, dampening hopes for a strengthening of the recovery, Cyprus shrank by 0.7%, while the annual data for Greece showed a1.1% decline.
On a positive note, Slovakia recorded 0.6% growth, Spain and Belgium expanded by 0.4% and Austria by 0.3% (although below consensus of a 0.5% increase).
Overall Eurozone GDP data disappointed, showing a 0.2% rise missing expectations of 0.4% growth.
As Kit Juckes from Société Générale points out: “It goes without saying that a multi-speed Europe causes huge policy problems, especially in the absence of fiscal transfers.”
“And it also goes without saying that when inflation is already low, and fiscal policy needs to be tight, the cure is not internal devaluation through falling French wages/prices. It's not 'news' but Europe needs easier money and a weaker euro.”
Germany's GDP was reported increasing by 0.8% in Q1, up from the 0.4% rise in Q4 and above expectations of climbing 0.7%. As Caroline Newhouse, Senior economist at BNP Paribas notes, “domestic demand contributed positively to GDP growth, while net trade had a negative effect. This is good news as a more equilibrated growth will help Germany better cope with a deceleration in its main trading partners’ activity.”
French numbers showed the country stagnating in the first quarter, due to a drop in consumer spending, while Italy, Finland and the Netherlands contracted, by 0.1%, 0.4% and 1.4%, respectively. The shocking Dutch result was attributed a a sharp fall in natural gas consumption due to this year's warm winter.
Among the countries under austerity programs, Portugal contracted by 0.7%, dampening hopes for a strengthening of the recovery, Cyprus shrank by 0.7%, while the annual data for Greece showed a1.1% decline.
On a positive note, Slovakia recorded 0.6% growth, Spain and Belgium expanded by 0.4% and Austria by 0.3% (although below consensus of a 0.5% increase).
Overall Eurozone GDP data disappointed, showing a 0.2% rise missing expectations of 0.4% growth.
As Kit Juckes from Société Générale points out: “It goes without saying that a multi-speed Europe causes huge policy problems, especially in the absence of fiscal transfers.”
“And it also goes without saying that when inflation is already low, and fiscal policy needs to be tight, the cure is not internal devaluation through falling French wages/prices. It's not 'news' but Europe needs easier money and a weaker euro.”