In the final quarter of 2008 gross domestic product in the euro area fell by a seasonally adjusted 1.5% on the preceding quarter. This is doubtless a nasty blow, but not a surprise. Looking at the sequential rates of the large EMU countries, Germany with -2.1% and Italy with -1.8% were the ugliest, France and Spain recorded rates of -1.2% and -1% respectively.
Euro area: Private consumption can do more
Both Germany and France were dragged down by foreign trade and investment. But whereas private consumption in Germany was weaker than in the the third quarter, in France it picked up. And it’s on household consumer spending that hopes are pinned for this year: in the first quarter the decline in euro area GDP is likely to be lower with a sequential rate of -0.7% as it would seem that the drop in the oil price did not yet have a substantial impact on consumer spending in the final quarter of 2008. The EMU savings rate also flags up potential for more private consumption demand, rising to a seasonally adjusted 14.4% in Q3 2008, its highest level since 2004.
For 2009 as a whole we still expect the EMU economy to shrink by 1.4%. As today’sGDP figures were more or less in line with expectations, the ECB is unlikely to spring any major surprise on the monetary policy front: the rate cut signposted for March looks a done deal and, as last time, will probably amount to 50 basis points.
Claudia Broyer
tel.: 49 / 69 / 2 63 – 1 97 90
e-mail: [email protected]