As expected, Euro-area GDP shrank by less in Q1 (-0.2%) than in Q4 of last year, but it still shrank and the weakness was widespread through the common currency area (see table below for data on the larger countries):
– German growth (0.1%) was held back by an unusually cold winter but that’s doesn’t explain all the weakness.
– In France, an increase in government consumption could not compensate for a small decline in private consumption and larger ones in capital spending and exports. Note, however, that France still looks much more robust than Italy and Spain.
– In Italy, GDP – in the longest recession on record – fell for the 7th quarter in a row and is down by an accumulated 4% since the 2nd quarter of 2011.
– Spanish GDP fell by 0.5%, with no details known for now.
– As a Euro core country in recession, the Netherlands are a very interesting case. The reported rise in private consumption over the quarter was the first since end-2011 (!). Given the weak housing and deteriorating labour market, the outlook for consumption remains cloudy. Fixed capital spending was down 11.6% over the year. It was foreign trade that prevented GDP from falling more than just 0.1% q/q in the first quarter.
Apart from Germany, Slovakia (0.3%) and Belgium (0.1%) were the only other Euro-area countries with positive q/q-readings. GDP was flat in Austria (see Eurostat’s press release here for more results).
The outlook: Bleak – this is the short version. Most sentiment indicators are pointing to declining GDP also in Q2. We still consider “some” recovery – meaning positive GDP q/q-readings – likely for the second half of this year. As an indication, a -0.2% reading in Q2, followed by +0.2 both in Q3 and Q4 would result in GDP declining by 0.7% y/y this year over last. Our current forecast for the full year 2013 is -0.4%, and we will revise that down shortly.
Nordea