MNI 5 THINGS: EMU Q1 GDP Growth Likely Slowed Sharply

--EMU Flash Preliminary Q1 GDP Growth Released Weds

     LONDON (MNI) - Data Wednesday will likely show the pace of economic

activity slowed over the first three months of 2018. Eurostat publishes the

flash preliminary estimate of Q1 growth in the euro area at 0900GMT.

     Ahead of the release, we outline five themes for particular attention.

     Analysts tend to underestimate Q1 growth. 

     As shown below, analysts tend to underestimate Q1 GDP growth. Since 2006,

quarter-on-quarter GDP growth has been over-estimated three times, with the

average suggesting a slight underestimate of 0.07 percentage points and the sum

of Q1 estimates showing analyst underestimates of 0.8 percentage points.

     Q4 Revised up but Q1 likely softer. 

     Growth in Q4 last year was revised up by a tenth of a percentage point to

an impressive 0.7% q/q, enough to take the annual quarterly rate to 2.8% -- the

highest rate of growth since Q1 2011. Activity, however, appears to have tapered

as we moved in to 2018 due to a combination of cooling activity and temporary

drags. Euro area data released thus far (industrial production, retail sales and

construction) have all captured the growth momentum losing some of its legs. The

market consensus, taken from the MNI survey, looks for a sharp slowdown in

growth to 0.4% q/q in Q1, consistent with an annual rate of around 2.5%.

     National Breakdown. 

     Growth among the major European economies failed to pick up speed over the

first quarter, according to preliminary data and highlighted below. In France,

official preliminary data placed growth at 0.3% q/q, down from 0.7% q/q in Q4,

driven by a softening in investment and trade. Growth also slowed in Austria

(0.7% q/q vs 0.9% q/q) while, bucking the trend, in Spain it was unchanged at a

healthy 0.7%. Data from Germany and Italy are yet to arrive but analysts do not

envisage a Q1 pickup in growth in either economy.

     Table 1: Growth in major euro area economies

           Q4 GDP growth, % q/q  Q1 GDP growth, % q/q (Prelim., Flash)

----------------------------------------------------------------------

Euro Area                   0.7                                      ?

France                      0.7                                    0.3

Austria                     0.9                                    0.7

Spain                       0.7                                    0.7

Italy                       0.3                                      ?

Germany                     0.6                                      ?

     Composite PMI Slowed. 

     The IHS Markit composite PMI slowed from almost touching 60 in January to

hovering just above 55.0 in March, with the February-March weakness attributed

to a weakening in new orders and softer optimism in the business outlook. At

55.2, the PMI was the lowest it had been in fourteen months in March and

consistent with q/q GDP growth of around 0.5% in Q1. In April, the month's flash

estimate of the PMI was unchanged, also at 55.2.

     Looking forward. 

     Economic sentiment from the European Commission -- a composite measure of

confidence across the industrial (40%), services (30%), consumer (20%), retail

(5%) and construction (5%) sectors -- suggests GDP has room to grow even if

things do slow down in Q1. The EC Economic Sentiment Indicator held firm at

112.7 in April, level with the 12-month average, in April.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

--MNI London Bureau; +44 203 865 3828; email: jai.lakhani@marketnews.com

--MNI London Bureau; +44 203-586-2226; email: jamie.satchithanantham@marketnews.com

[TOPICS: MAXPR$,M$X$$$]