In the first three months of the year eurozone GDP rose by 0.2% on the previous quarter and thus at the same pace as in the final quarter 2013. The main contribution came from Germany, where the pace of growth doubled (see today’s separate NewsLine). By contrast, France performed weakly, with domestic demand and net exports slipping and only inventory changes ensuring GDP stagnation. As a result we have revised our 2014 growth forecast for the French economy down to 0.8%. We have also trimmed our estimate for Italy down to 0.3%, with the economy there shrinking marginally in the first quarter contrary to our expectations. Although the conspicuously negative GDP sequential rate in the Netherlands (-1.4%) is cause for concern, it can in part be seen as a technical reaction to the very strong final quarter 2013.
Similarly, the hefty drop of 0.7% on the previous quarter in Portugal also came on the heels of a positive development, leaving GDP more than 1% up on a year earlier in the first quarter. Encouragingly, the Spanish economy grew by 0.4% q-o-q, twice the rate seen in the preceding quarter – for Spain we are sticking with our GDP forecast of 1% for this year. Following today’s figures, we are expecting growth in the eurozone as a whole of 1.2% this year (previously 1.5%). GDP sequential rates are likely to pick up to around 0.4% – in the first quarter the late Easter holiday probably also had a certain dampening effect. All told, the latest figures show that, although the recovery in the eurozone is not grinding to a halt, it is susceptible and fraught with uncertainty.