Neither icing nor a cake – Rabobank

Analysts at Rabobank offered a review of Friday's Eurozone GDP figures, which showed that the economy grew by 0.1% q-o-q in the fourth quarter of 2019 as against consensus expectations of 0.2% q-o-q.

Key Quotes:

“We will have to wait until February for the official breakdown by components of GDP growth. From the growth figures from individual member states we cannot point out an obvious component that contributed hugely to economic growth in the Eurozone. Although it looks like net exports no longer dragged down economic growth as they did in previous quarters. This obviously implies that growth of domestic demand slowed down further.”

“Looking forward, PMIs and sentiment indicators suggest this quarter might be better than the previous one, but a significant acceleration is unlikely. For the year as a whole, we expect the Eurozone economy to grow at a slightly slower pace than last year’s: we forecast growth of (slightly under) 1.0% for this year and 0.8% next year, after 1.2% in 2019.”

“Growth will primarily be driven by domestic demand. Domestic demand is supported by a strong labor market, real wage growth and high consumer confidence, albeit at a slightly deteriorating pace going forward. We forecast a recession in the US end-2020, which will hurt the entire global economy. The recently signed phase-one deal slightly eases tensions for the time-being, but does not materially improve our outlook. Especially not since we expect tensions to re-escalate in the course of 2020. Ongoing uncertainty and a harder-than-foreseen Brexit end-2020 could also turn out to be a growth-dampener in 2020/2021.”