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Han de Jong, chief economist at ABN AMRO, notes that the growth momentum in the global economy has softened for a year or so and suggests that the question for the remainder of the year (and beyond) is whether the softening continues and some economies end up in recession or not.

Key Quotes

“The alternative route is a strengthening of growth. I am a believer in the latter view. If the economy is going to improve, we must be close to what you could call a turning point in the cycle. Around these turning points one should expect very mixed data as some economies lead the cycle while others lag. And that is exactly what recent data shows.”

“In the brave new world where China plays a key role, the eurozone is most likely still lagging, but perhaps less clearly just lagging the US. It is no surprise then that the eurozone is not showing much sign of improving momentum. The European Commission’s index for Economic Sentiment weakened again in April and fell short of not overly optimistic expectations. The data confirms that the problems are mainly in the industrial sector.”

“Eurozone GDP surprised on the positive side in Q1 by growing 0.4% qoq and 1.2% yoy. We know very few details yet, but it is likely that domestic demand made the most important contribution. It is also likely that the 0.4% growth rate is flattering what is really going on, just like the US Q1 GDP growth rate of 3.2% annualised also flattered what was going on in that economy.”

“The key point for me is that any fundamental improvement in economic momentum in the eurozone depends to a large extent on global economic conditions.”