MNI: Euro Area GDP Growth Slows Sharply As Expected

--EMU Prelim Flash Q1 GDP Growth +0.4% q/q vs +0.7% q/q

By Jamie Satchithanantham

     LONDON (MNI) - Economic activity in the euro area moderated in the first

quarter of 2018 in line with market expectations, according to a preliminary

flash estimate published by Eurostat Wednesday.

     --FIRST DECLINE IN GROWTH IN TWO YEARS

     Seasonally adjusted GDP grew by 0.4% in the euro area (EU19) versus the

previous quarter, correctly predicted by analysts, following growth of 0.7% q/q

in the fourth quarter of 2017. This was the first decline in q/q euro area

growth since Q2 2016.

     Over the same quarter a year ago, GDP rose by 2.5% in Q1, down from 2.8% in

Q4, the first fall in year-over-year quarterly GDP growth since Q1 2016.

     At this early stage, gauging whether the slowdown was influenced more by

temporary phenomena or more underlying issues will only become clearer with

later editions of the data. 

     --ANALYSTS' CORRECT CALL

     Analysts, who have a tendency to under-estimate Q1 growth, correctly

predicted the result for only the second time since 2006.

     IMF BOOSTS EU19 GROWTH FORECASTS   

     Last month, the International Monetary Fund (IMF) boosted its euro area

growth path on the back of "stronger than expected domestic demand...,supportive

monetary policy, and improved external demand prospects". 

     The IMF growth forecast was revised up by 0.5pp to 2.4% in 2018 and 0.3pp

to 2.0% in 2019 in its April World Economic Outlook report, versus its forecasts

made in October.

     --LABOUR MARKET REMAINS TIGHT

     Elsewhere, data also published by Eurostat Wednesday revealed the continual

theme of euro area labour market tightness. The unemployment rate in the euro

area was confirmed at 8.5% in March, unchanged from February, the lowest rate

since December 2008. 

     Over the entire EU28 area the jobless rate was 7.1%, also stable compared

to a month prior, the lowest since September 2008.  

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

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

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