Eurozone Economic Watch May 2018
BBVA Research - Eurozone Economic Watch / 2 Eurozone: more moderate growth with higher uncertainty The eurozone GDP growth slowed in more than expected. Beyond temporary factors in early year and some recovery in hard data in March, further decline in confidence data up to May point to a more moderate growth forward and increase concerns about the negative effect of uncertainty on the real economy in coming months if it persists. Exports recovered in March from early declines in the year, but the increase in industrial output and retail sales was not enough to avoid a quarterly decline. Despite this, the labour market s spare capacity continued to narrow. The MICA-BBVA model projects GDP growth to remain at around 0.4% QoQ in. Data so far for 2018 put a downward bias on our annual growth forecast of 2.3%. Inflation slowed to +1.2% YoY driven by a lower contribution from services, because of calendar effects from Easter holidays. Accordingly, core inflation declined by 0.2pp to +1.1%, but we continue to foresee a gradual increase in core figures during the year. Recent oil price developments and euro depreciation will add upward pressures for headline inflation in coming months. Downward risks continue to increase, characterized mainly by political and geopolitical uncertainty and protectionism that could lead to tighter financial conditions and protracted higher commodity prices.
Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 BBVA Research - Eurozone Economic Watch / 3 More moderate growth after slowing in GDP growth slowed to 0.4% QoQ in after 0.7% in the previous quarter, more than expected. Our MICA-BBVA projects a similar quarterly pace for (0.4% QoQ) and cools down expectations of a possible rebound in growth in GDP, contribution by components (%QoQ, pp) 2.5 GDP and MICA forecasts (%QoQ) 0.8-0.4 0.6 0.4-0.2 Imports Change in inventories Public consumption Real GDP Exports Gross fixed capital formation Private consumption CI 20% CI 40% CI 60% Observed
1Q17 2Q17 3Q17 1Q17 2Q17 3Q17 1Q17 2Q17 3Q17 1Q17 2Q17 3Q17 Germany France Italy Spain BBVA Research - Eurozone Economic Watch / 4 Broad-based moderation across countries in early 2018, except in Spain which showed a stable growth pace GDP and expenditure contribution by country (%QoQ, pp) 2.0 12 9 0.3 0.3 0.3 0.7 6 3 0 - -3 - -6 - -9 Germany France Italy Spain Diff. GDP level relative to 2008 Private consumption Public consumption Gross fixed capital formation Change in inventories Exports Imports Real GDP Eurozone GDP
May-14 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16 May-16 Aug-16 Nov-16 Feb-17 May-17 Aug-17 Nov-17 Feb-18 May-18 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Apr-18 BBVA Research - Eurozone Economic Watch / 5 Confidence figures decline further in May, reflecting higher uncertainty This worsening is observed in both manufacturing and services for the fifth month in a row. Although confidence remains still at high levels, it points to a more moderate growth onwards than that observed in 2H17 and increases concerns about the negative effect of higher and persistent uncertainty on private consumption and investment PMI and GDP (level, %QoQ) EC confidence survey (level) 62 60 58 PMIs level GDP (% QoQ) 1.2 0.9 120 115 110 105 30 20 10 56 0.6 100 0 54 52 0.3 95 90 85-10 -20 50 80-30 Real GDP (% QoQ) Manufacturing PMI PMI Services PMI ESI (lhs) Consumer (rhs) Industrial (rhs) Services (rhs)
Apr-18 May-18 Apr-18 May-18 Apr-18 May-18 Apr-18 May-18 BBVA Research - Eurozone Economic Watch / 6 Across countries, sentiment declines markedly in Germany and France, but is still consistent with a solid expansion According to flash figures, growth slowed markedly both in Germany and France, but accelerated across the rest of the region Although some moderation in optimism was expected due to some evidence on supply constraints and the appreciation of the euro over last year, the less positive outlook could be reflecting softer global tailwinds PMI survey (level) 64 62 60 58 56 554 52 50 3Q17 3Q17 3Q17 3Q17 Germany France Italy Spain Composite PMI Manufacturing PMI Services PMI
Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Nov-14 Mar-15 Jul-15 Nov-15 Mar-16 Jul-16 Nov-16 Mar-17 Jul-17 Nov-17 Mar-18 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 BBVA Research - Eurozone Economic Watch / 7 Industrial output picked up in March, but was not enough to avoid a quarterly loss in Industrial production recovered in March (+% m/m) due to stronger output of consumer goods. Despite disappointing figures in the production of both investment and durable goods, increasing capital utilization by firms would suggest further private investment in coming months Industrial production (level, %QoQ) 112 110 108 106 104 102 0.1 100 98 96 IP (level) 0.3 1.4 0.1 0.7 1.9 IP (% QoQ) 1.3 3.0 2.5 2.0-0.6 - - IP capital equipment, investment in M&E and capacity utilization (%QoQ, %) 6 5 4 3 2 1 0-1 -2-3 Inv. M&E, IP capital (% QoQ) Capacity utilization (%) 86 84 82 80 78 IP (2012=100) IP (% QoQ) Investment M&E (% QoQ) Capacity Utilization (%) IP Capital (% QoQ)
Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Nov-14 Mar-15 Jul-15 Nov-15 Mar-16 Jul-16 Nov-16 Mar-17 Jul-17 Nov-17 Mar-18 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 BBVA Research - Eurozone Economic Watch / 8 The trade balance stabilized in, with exports mostly flat and imports growing moderately Trade balance ( bn, %GDP) Exports by destination (%QoQ, pp) 200 190 Exports, imports & trade balance ( bn) 1.2 4 3 180 0.8 0.8 2 1 170 0.6 0 160 150-1 0.4-2 Trade balance (% GDP) 0.2-3 140 Trade balance ( bn) Exports ( bn) Imports ( bn) Trade balance (%GDP) Other EU countries China LatAm Total Exports United States Asia (ex China) Rest of world
Apr-13 Aug-13 Dec-13 Apr-14 Aug-14 Dec-14 Apr-15 Aug-15 Dec-15 Apr-16 Aug-16 Dec-16 Apr-17 Aug-17 Dec-17 Apr-18 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 BBVA Research - Eurozone Economic Watch / 9 Retail sales recovered somewhat in March from early year loses, but slowed down overall in Retail sales have fallen in, but have recovered in March and the fundamentals of consumption remain strong. Consumer confidence is still high and employment gains are solid. Retail sales and consumer confidence (%QoQ, pts) Retail sales and total wage bill (%YoY, pp) Retail Sales (% QoQ) 5 0 4 3-0.4 0.1 0.4 0.7 0.4 0.4-5 -10-0.2-15 2 1 0-1 -2 - Consumer Confidence -20-3 - -25-4 Retail Sales (% QoQ) Consumer Confidence Employees Total wage bill Real compensation Retail sales
Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 BBVA Research - Eurozone Economic Watch / 10 The unemployment rate stayed flat at 8.5%, although the idle capacity in the labor market continued to narrow Unemployment rate by country (%) 20 The unemployment kept steady at 8.5% in March, with still slack to absorb in the labour market The decline of unemployment continued for the prime-age population Annual unemployment change by gender & age (millions) -0.2 15-0.4-0.6-0.8 10 - -1.2 5-1.4-1.6-1.8 0 Mar-17 Feb-18 Mar-18 Eurozone Germany France Italy Spain Women 25-74Y Men 25-74Y Men < 25Y Women < 25Y Total
Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 Feb-18 Apr-18 BBVA Research - Eurozone Economic Watch / 11 Headline and core inflation declined in April due to calendar effects HICP decreased to 1.2% YoY in April, with a lower contribution of the services component due to calendar effects from Easter holidays Core inflation also went down by 0.2pp to 1.1% YoY but will revert slowly during the year to figures of around % Inflation and contribution of components (%YoY, pp) 2.0 3.5 3.0 2.5 2.0 Core and trimmed-mean inflation (%YoY) - - - Services Processed Food Unprocessed Food Non-energy industrial goods Energy HICP (% y/y) Trimmed mean inflation Core inflation
BBVA Research - Eurozone Economic Watch / 12 Inflation declined in most countries in April, except in France Headline and core inflation (%YoY) 3.0 2.5 2.0 1.7 1.2 0.6 1.3 0.8 2.0 1.1 1.6 1.3 2.2 2.2 2.2 1.6 0.8 1.3 0.9 1.1 0.6 0.3 - Germany France Italy Spain Portugal Austria Belgium Finland Netherlands Greece Ireland Headline Inflation (% YoY) Core Inflation (% YoY) Headline Inflation 2017 Core Inflation 2017
Eurozone Economic Watch May 2018
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