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Eurozone GDP Growth Falters

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Eurozone Gross Domestic Product (GDP) growth has disappointed markets this morning despite showing some clear gains on the previous quarter. The preliminary figures suggest that the single currency bloc has in the first quarter of this year repeated the 0.2% growth achieved in the final quarter of 2013, economists had been expecting this to rise to 0.4%. On an annualized basis this has risen to 0.9% from the 0.5% reported at the end of the last calendar year, markets were looking for this figure to be closer to 1.1%.

Greece and Portugal also reported GDP growth data this morning. The Greek figure contained a positive surprise element, although still in contraction the rate at which this is occurring has slowed significantly from -2.3% per annum to just -1.1%, a rate of -1.5% had been anticipated by market participants.

Portugal on the other hand has slipped back into recessionary territory according to preliminary first quarter data. The Portuguese economy grew by 0.6% in the last quarter of 2013 but today’s release suggests that the first quarter of this year yielded a contraction of -0.7%, the consensus estimate was for very moderate growth of 0.15%. The annualized figure for Portugal remains positive although it has displayed some slippage from 1.7% to just 1.2% growth, markets were both disappointed and surprised as the consensus estimate was for an optimistic 2.1% annualized growth rate.

Both the International Monetary Fund (IMF) and the European Central Bank (ECB) will be let down by the poor growth performances of these two bail out countries. The latter institution will need to give serious consideration to this fall off in growth in the periphery economies of the Eurozone when it meets to discuss the potential for further monetary policy stimulation the week after next, particularly in light of the fact that it’s retreat from quantitative easing is likely to drive up the cost of public debt across the entire Eurozone.

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