Free songs

Q2

Eurozone Q2 GDP Forecasts: Last Update

Since our last update, several German and French officials confirmed that the two largest economies grew in Q2 and even gave some indications regarding  second-quarter figures:

 

1/ The German economy probably expanded about 0.75 percent in the second quarter, according to a government estimate.

2/ After saying that recession is over, France’s finance minister denied that France has revised down its economic prospects for 2013 suggesting that the Q2 figures could be encouraging.

 

As a consequence, we can update our scenarios with a more optimistic approach regarding French and German contributions. By taking into account the weight of each economy in the euro area (Germany: 27%; France: 21%; Italy: 18%; Spain: 12% and Belgium: 5%), we can adjust our forecasts:

 

 

Growth Forecasts
Scenario Pessimistic Central Optimistic
Germany 0.75% 0.75% 0.75%
France 0.1% 0.2% 0.3%
Italy (1st publication) -0.2% -0.2% -0.2%
Spain (1st publication) -0.1% -0.1% -0.1%
Belgium (1st publication) 0.1% 0.1% 0.1%
Others -0.2% -0.1% 0.0%

 

Growth Contributions
Scenario Pessimistic Central Optimistic
Germany 0.202% 0.202% 0.202%
France 0.021% 0.042% 0.063%
Italy (1st publication) -0.036% -0.036% -0.036%
Spain (1st publication) -0.012% -0.012% -0.012%
Belgium (1st publication) 0.005% 0.005% 0.005%
Others -0.034% -0.017% 0.000%
Total 0.146% 0.0184% 0.0222%
Total (rounded) 0.1% 0.2% 0.2%


 

Last data change the final results (rounded) of each scenario. The central estimate becomes 0.2%. Therefore, thanks to Germany and France, the Eurozone economy should technically  recover (two positive quarters) in Q3 as several surveys  (Eurozone PMI, Sentix Investor Confidence) show that conditions have improved since the end of June.

Spanish Q2 GDP Supports the Scenario of an Eurozone Recovery

The Spanish economy is finally about to return to growth, with official estimates showing that GDP fell by only 0.1% in Q2 2013 – the slowest rate of decline in almost two years. These data were in line with my central estimate and supports the scenario of an Eurozone recovery in Q3 (two positive quarters).

 

I’m now waiting for French and German figures but if they are in line with national central banks’ estimates, Eurozone GDP could reach at least 0.1% in Q2.

 

By taking into account the weight of each economy in the euro area (Germany: 27%; France: 21% and Spain: 12%), we can adjust our forecasts:

 

 

Growth Forecasts
Scenario Pessimistic Central Optimistic
Germany 0.3% 0.4% 0.5%
France 0.1% 0.2% 0.3%
Spain (1st publication) -0.1% -0.1% -0.1%
Others -0.2% -0.1% 0.0%

 

 

 

Growth Contributions
Scenario Pessimistic Central Optimistic
Germany 0.081% 0.108% 0.135%
France 0.021% 0.042% 0.063%
Spain (1st publication) -0.012% -0.012% -0.012%
Others -0.080% -0.040% 0.000%
Total 0.010% 0.098% 0.0186%
Total (rounded) 0.0% 0.1% 0.2%


 

The publication does not change the final results (rounded) of each scenario but reduces the uncertainty concerning a potential deviation from my central estimate. As a consequence, tomorrow, Mario Draghi should underline that even if uncertainty remains, economic prospects are improving.

Eurozone Recovery Could Take Place in Q3 2013

According to the PMIs’ surveys published this morning, Eurozone business activity resumed modest growth in July for the first time since the start of 2012.

 

More from Reuters:

 

Euro zone private industry unexpectedly bounced back to growth this month as factories increased output for the first time in well over a year, business surveys suggested on Wednesday.
 
Markit’s flash Eurozone Composite PMI, based on surveys of thousands of companies across the region and a reliable indicator of growth, jumped to an 18-month high of 50.4 in July from 48.7 in June.
 
That smashed even the most optimistic forecast in a Reuters poll and is the first month the PMI has been above the 50 mark that divides growth and contraction since January 2012.
 
“It’s a very encouraging picture, it’s pretty broad-based. Germany is leading the pack followed by France but even the periphery … is seeing a return to growth in manufacturing,” said Chris Williamson, chief economist at data collator Markit.
 
Williamson said the latest PMI results tentatively pointed to 0.1 percent gross domestic product growth in the 17-nation bloc in the current quarter, in line with a Reuters poll taken earlier this month.

 

These figures were unveiled while the main central banks of the euro area (Bundesbank, Bank of France and Bank of Spain) upgraded their forecasts concerning Q2 2013. Indeed, on July 22, Bundesbank reported that German economy grew at a stronger pace in Q2 (after 0.1% in Q1) with more moderate growth seen in Q3:

 

The assessment that the German economy expanded strongly in the second quarter after a weather-related weak start to 2013 is being confirmed by current indicators. Important contributions to growth in the second quarter should come from industry and construction.

 
 
On July 23, Bank of Spain estimated that the Spanish economy likely contracted 0.1% in the second quarter from the first.

 

Spain’s central bank said Tuesday the euro zone’s fourth-largest economy likely contracted 0.1% in the second quarter from the first, the latest sign that Spain may be close to emerging from a recession started in late 2011.

In the first official estimate of quarterly economic performance, the Bank of Spain said gross domestic product likely contracted 1.8% from the second quarter of 2012. In the first quarter this year, the economy had contracted 0.5% on the quarter and 2% on the year.

 

Finally, on July 8, Bank of France upgraded its forecast for Q2 GDP to 0.2%:

 

France’s economy is expected to have grown 0.2% in the second quarter, the Bank of France said Monday, as it revised upward its prediction from last month.
 
In its previous estimate, the French central bank expected French gross domestic product to grow 0.1% from the previous quarter.

 

As a consequence, by taking into account the weight of each economy in the euro area (Germany: 27%; France: 21% and Spain: 12%), we could simulate Eurozone GDP with more precision:

 

Growth Forecasts
Scenario Pessimistic Central Optimistic
Germany 0.3% 0.4% 0.5%
France 0.1% 0.2% 0.3%
Spain -0.2% -0.1% 0.0%
Others -0.2% -0.1% 0.0%

 

 

 

Growth Contributions
Scenario Pessimistic Central Optimistic
Germany 0.081% 0.108% 0.135%
France 0.021% 0.042% 0.063%
Spain -0.024% -0.012% 0.000%
Others -0.080% -0.040% 0.000%
Total -0.002% 0.098% 0.198%
Total (rounded) 0.0% 0.1% 0.2%


 
In the central scenario, based on the main central banks’ expectations and on the assumption of a less deeper recession in other countries, Eurozone growth could now reach 0.1% in Q2 2013. Therefore, if the momentum stays positive in August and September, Eurozone could technically exit recession in Q3 2013 (two positive quarters), which will be faster than expected.

Spanish Officials See Stabilization in Q2 2013

1/ This morning, Spain’s Finance Minister Luis de Guindos made positive comments regarding economic situation and expected GDP to be closer to zero in Q2:

 

More from the Wall Street Journal:

 

Spain’s Finance Minister Luis de Guindos said Tuesday that the rate of contraction of gross domestic product will be close to zero in the second quarter, signalling that an end to the economic recession is in sight.
 
According to Spanish newswire EFE, Mr. De Guindos said at a conference in the city of Santander that we’re at an inflexion point which indicates that we can leave the recession behind us.

 

2/ Just after, Prime Minister Mariano Rajoy said that there are positive signs regarding Spanish economy so that the worst is over. As an exemple, Rajoy underlined that exports of goods rose 8% from a year ago during first four months of the year

 

More from CincoDias:

 

“Creo que lo peor ha pasado, por eso vamos a mantener la misma línea de política económica y lo creo así porque aunque los resultados lleven su tiempo, algo que dijimos, estas políticas están dando sus frutos y hay indicadores positivos que son el prólogo o la primera página de la recuperación económica”
 
“En este punto, ha señalado que las exportaciones de mercancías estaban creciendo un 17% en abril en términos reales y que su crecimiento medio en los primeros cuatro meses del año ha sido del 8%.”

 
 My view

 

- Spanish economy has showed positive signs since March.
 
- It confirms my feeling that Eurozone growth could stabilize in Q2 2013 before recovering in H2 2013.
 
- Indeed, it seems that German growth (27% of EU economy) should accelerate in Q2 around 0.3% QoQ while French (20% of EU economy) and Spanish (12% of EU economy) growth could stabilize.