Sobering quarterly results for economic growth in the eurozone

The dip in economic growth in the eurozone carried over to the fourth quarter of 2018. Economic growth compared to the previous quarter remained at a feeble 0.2%. Concerns about a possible hard Brexit, new EU exhaust emission standards and smouldering international trade disputes held back most of the national economies in the currency area. In particular the three largest eurozone countries – Germany, France and Italy – slowed down in terms of economic growth. The cyclically weaker second half of 2018 in the eurozone also dragged down the annual average noticeably: following macroeconomic growth of 2.4% for 2017, growth last year was only 1.8%.

The outlook for the current year is similarly cautious. The climate in the private sector just recently has only been “slightly optimistic”, stating it cautiously. Based on this assumption we are likely to see a cooling of economic growth to about 1% for the 2019 full year.

There is so far no official quarterly figure for Germany for the end of 2018. However, the annual average of 1.5% announced in January leads one to the conclusion that the final quarter turned out to be anything but dynamic. In the industrial sector in particular things have not been going well since mid-year: in the automotive industry new exhaust emission standards and diesel issues led to considerable upheaval. In other sectors such as chemicals low water levels in the autumn caused production stoppages. Meanwhile global demand for German industrial products slowed down due to the various negative political factors.

France ended 2018 in rather better shape. Instead of the expected figure of 0.2% the French statistics office announced solid economic growth of 0.3% compared to the previous quarter. However, this figure is no reason to celebrate. This is because the negative impact of the “gilets jaunes” protests is clearly visible in the economic data, with Christmas trade in particular suffering the effects of the sometimes violent clashes. Nevertheless, rising net exports and a slight increase in investment ensured that the quarterly result was positive at least. The annual average for 2018 was 1.5%, compared to 2.3% in the previous year.

By contrast the Italian economy went into reverse gear in the fourth quarter, contracting by 0.2%. There is no sign of the feared technical recession for the time being though, as the previous quarter was revised upwards to plus 0.1%. Nevertheless, the EU budget dispute is likely to have caused additional uncertainty in the private sector in the fourth quarter. Italy thus only achieved the moderate figure of 0.8% for the 2018 full year. Italy once again numbers among the growth laggards, therefore, and is likely to remain one for the time being with growth of just 0.5%.

Spain, on the other hand, is far removed from the doldrums of the other eurozone countries and indeed went one better in terms of economic growth: at 0.7% compared to the previous quarter growth was somewhat stronger than in the summer months – despite the political deadlock of the minority government led by social democrat Pedro Sanchez. The net export balance had a positive impact for the first time in a year, though as previously the bulk of the growth was provided by good domestic demand.

The Belgian economy also kept pace, growing for the fourth time in succession by 0.3% compared to the previous quarter. Things were different in Austria: the weakened German economy clearly made an impact there. The economic growth of the Alpine nation halved in the fourth quarter to an insubstantial 0.2% compared to the previous quarter – the weakest growth for two-and-a-half years.

Further growth figures for most of the other eurozone countries, including the quarterly figure for Germany, will be announced on 14 February 2019.

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