Bert Colijn, Senior Economist at ING, notes that the Eurozone economy grew by just 0.3% QoQ in the second quarter with inflation increasing to above 2%.
Key Quotes
“Perhaps still temporary, but factors with a longer shelf life seem to have brought Eurozone GDP growth down to a lower cruising speed for the moment.”
“The confidence impact of a trade row and weaker real household income growth seem to be spoiling the European party for the moment.”
“Trade uncertainty seems to have already had a significant effect on the Eurozone economy in Q2.”
“Lower consumer confidence has taken some of the wind out of the sails from consumption growth.”
“Inflation remained high despite the weaker growth path that the Eurozone economy is on in 2018 but mainly driven by higher energy prices. The energy index increased by 9.4% YoY.”
“The core rate picked up to 1.1%, which is where it was in May as well. This is still weak and very much in line with ECB expectations.”
“The weaker cyclical picture and low core inflation provide little reason for the ECB to increase rates before autumn next year. Any “behind the curve” thoughts that surfaced earlier this year when the mood was still Europhoric can be parked for the moment.”
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