Daily News

View All News

Eurozone – Bad weather and weaker exports soften growth

12 April 2011

Gross Domestic Product (GDP) growth softened in Q4 2010 (to +0.3%, after +0.4% in Q3), due to a weather-related postponement of construction investment, notably in Germany and in France, and to a slowdown in global activity, which dampened the area export growth, according to the latest Eurozone Economic Outlook published jointly by the Institute for Economic Research at the University of Munich (Ifo), the French National Institute of Statistics and Economic Research (Insee) and the Italian National Institute of Statistics (Istat).

Consumption rebounded at a rate of +0.4%, in part attributable to a strong growth in French automobile consumption, driven by the prospect of the scrappage bonus expiration on 31 December 2010.

GDP in the Eurozone is expected to accelerate in Q1 2011, moderating over the forecast horizon (+0.5% in Q1 2011, +0.4% in Q2 and Q3).

Private consumption growth is expected to flatten (around +0.2% per quarter), as the Eurozone labour market as a whole is likely to remain fragile, with uneven developments across member states. Furthermore, both fiscal consolidation in many Eurozone countries and inflation are forecast to dampen households' real income.

Under the assumption that the oil price stabilises at $113 per barrel of Brent and that the Euro/Dollar exchange rate fluctuates around 1.38 over the forecast horizon, inflation should stabilise at 2.6 % in June and in September 2011, from 2.2% in December 2010.

Investment is expected to rebound in Q1 2011, owing to a sharp rise in the construction sector and to improved growth prospects. In Q2 and Q3, it should increase further but at a slower pace, because of a loss of momentum in foreign demand and financial markets increased uncertainties at the beginning of 2011: new tensions have emerged surrounding the sovereign debt of some Eurozone states, particularly Ireland, Greece, and Portugal.

The political tensions in the Middle East and North Africa are raising fears of a lasting rise in oil prices, and of a resulting tightening of monetary policy in order to curb inflation.

Lastly, the earthquake in Japan might cause prolonged supply-chain disruptions in some key economic sectors.

To read the full survey please click here


Add New Comment

Post comment

NOTE: Links will not be clickable.
Security text:*