Eurozone: Marginal dip in economic sentiment – ING

Bert Colijn, Senior Economist at ING, suggests that the drop in the Eurozone’s Economic Sentiment Indicator from 112.7 to 112.5 shows that even before the Italian turmoil, sentiment wasn’t really recovering

Key Quotes

“Just a few months ago, the sky was the absolute limit for Eurozone sentiment, but now even stabilisation seems like a good result, as analysts expected worse.”

“Given that the survey does not account for the Italian turmoil, it’s safe to say that moderating growth continues to be the message of 2018. While a few one-offs impacted the disappointing 1Q growth rate of 0.4%, it seems that there is more permanence to the slower growth than initially expected even though Eurozone fundamentals remain strong with labour market strength and a favourable investment environment.”

“The months ahead are likely to see uncertainty continue as the Italian political crisis could drag on during the summer. As developments towards a new government continue, uncertainty about the Italian stance towards the EU and the euro will prevail.”

“This continued uncertainty will weigh on Eurozone growth in the months ahead, and a bounce back to growth rates seen in 2017 seems very difficult. We still expect growth to be above trend and stronger than 2%, but growth rates of 0.7% seen in 2017 seem to be off the table.”