by 3Q GDP growth in the euro area met expectations. The play off between strong business indicators and weak-ish credit dynamics means we maintain our full-year growth forecast of 1.5% in 2016.Euro area real GDP expanded at a quarter-on-quarter (q-o-q) rate of 0.3% in Q2 (1.4% q-o-q annualised, 1.6% year on year), in line with expectations and our own forecast. This comes after GDP growth of 0.3% q-o-q in Q2 and 0.5% q-o-q in Q1.Looking ahead, risks to our scenario for the euro area economy seem to be broadly balanced, if not tilted to the upside in the short term. On the positive side, euro area sentiment indicators have been coming in above expectations. In particular, Markit’s composite purchasing manager index for October was consistent with a GDP growth figure of 0.4-0.5% q-o-q in Q4 , which is above our own forecast. The European Commission business indicator rose strongly in October, well above expectations. In Germany, the October IFO survey of business sentiment reached its highest level since April 2014.On the negative side, credit data have been disappointing. Our measure of the credit impulse in the euro area has weakened significantly, suggesting that domestic demand is at risk of slowing down in the coming quarters. Of itself, this poses some downside risk to our GDP forecasts.
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Nadia Gharbi considers the following as important: Euro area GDP growth, Euro growth forecast, Macroview, Real GDP growth
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3Q GDP growth in the euro area met expectations. The play off between strong business indicators and weak-ish credit dynamics means we maintain our full-year growth forecast of 1.5% in 2016.
Euro area real GDP expanded at a quarter-on-quarter (q-o-q) rate of 0.3% in Q2 (1.4% q-o-q annualised, 1.6% year on year), in line with expectations and our own forecast. This comes after GDP growth of 0.3% q-o-q in Q2 and 0.5% q-o-q in Q1.
Looking ahead, risks to our scenario for the euro area economy seem to be broadly balanced, if not tilted to the upside in the short term. On the positive side, euro area sentiment indicators have been coming in above expectations. In particular, Markit’s composite purchasing manager index for October was consistent with a GDP growth figure of 0.4-0.5% q-o-q in Q4 , which is above our own forecast. The European Commission business indicator rose strongly in October, well above expectations. In Germany, the October IFO survey of business sentiment reached its highest level since April 2014.
On the negative side, credit data have been disappointing. Our measure of the credit impulse in the euro area has weakened significantly, suggesting that domestic demand is at risk of slowing down in the coming quarters. Of itself, this poses some downside risk to our GDP forecasts. The question is to what extent stronger cyclical momentum and a likely modest boost from net exports will offset a weaker credit cycle. On a brighter note, non-financial corporations are sitting on very large amounts of cash and large euro area companies at least are becoming less dependent on bank credit than before for investment spending.
The question is to what extent stronger cyclical momentum will offset a weaker credit cycle. For the moment, we are keeping unchanged our euro area GDP growth forecast of 1.5% for 2016 as a whole and 1.3% for 2017.