Eurozone Economic Forecast

Eurozone Economic Outlook

May 28, 2019

Flash estimates revealed that growth surpassed expectations in the first quarter of the year, reviving after last year’s sharp slowdown. Although a breakdown by components is not yet available, solid household spending likely supported the result as consumers benefitted from a tightening labor market. In addition, a relatively mild winter may have bolstered the construction sector, while the manufacturing sector is expected to have improved somewhat as one-off issues fade. That said, monthly data still points to soft activity overall and it remains to be seen if momentum will keep pace in Q2. Economic sentiment dropped for the 11th consecutive month in April and the composite PMI continued to point to a two-speed economy in May. Meanwhile, the European parliamentary elections revealed increasing divisions within the union. The vote suggests that the European project will likely remain stuck: with little appetite to move forward or backwards with integration and reforms.

Eurozone Economic Growth

Activity is seen slowing in 2019 as a tougher external backdrop dents exports and hinders investment. That said, the continuation of ultra-accommodative monetary policy, some fiscal loosening and growing wages will act as a buffer. Downside risks loom from an escalation of trade tensions, a slowdown in China, market volatility and lingering weakness in the manufacturing sector. Our panel left the Eurozone’s outlook unchanged this month after six downgrades, taking a wait-and-see approach after the positive Q1 outturn. Growth is seen at 1.2% in 2019 and 1.4% in 2020.

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Eurozone Facts

Exchange Rate1.130.65 %Jun 13
Stock Market1,159-0.52 %Jun 13

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