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Peter Vanden Houte, chief economist at ING, notes that the Eurozone’s Q1 flash estimate of GDP shows a decent 0.4% growth rate, above consensus (0.3%) and better than the 0.2% growth rate seen in the fourth quarter.

Key Quotes

“Year-on-year, growth was 1.2%. As the GDP components are not available yet, the figure is hard to interpret, but given the weak performance of manufacturing in the first quarter, net exports have probably contributed negatively to growth. Consumption, which slowed down in the second half of last year, was probably somewhat stronger in the first quarter, as unemployment continued to fall.”

“In February, the eurozone’s unemployment rate actually stood at 7.7%, with the quarterly average for 4Q at 7.93%.”

“While there are still a number of risks (think of trade tensions, higher oil prices and the Brexit uncertainty) the improving international picture is likely to support eurozone exports in the coming months. In a number of eurozone countries, fiscal policy is also somewhat looser which is likely to underpin household consumption. In that regard, GDP growth should hover around 0.3% in the remainder of the year. Not great, but probably the best we can expect in the current stage of the cycle.”

“Today’s figures probably haven’t made the European Cenral Bank any wiser. The economy remains solid enough not to need extra stimulus. But at the same time not much has to go wrong to bring GDP growth to a standstill. In that regard, wait-and-see remains the most likely ECB monetary policy stance.”