Eurozone: Strong Q1 growth likely to slowdown in Q2- BNP

Analysts from BNP Paribas, note that the Eurozone economy is likely to slowdown in the second quarter after strong numbers from the first quarter; but they affirm that the slowdown is expected to be short-lived.

Key Quotes:

“According to the most recent cyclical indicators, the strong growth reported in the Eurozone in Q1 is likely to be followed by a slowdown in Q2. We estimate Q2 growth at 0.2% q/q after 0.5% in Q1. Industrial output and retail sales were down strongly at the end of Q1.”

“As of now, for the Eurozone as a whole, the trend is slightly positive for industrial output and negative for retail sales. April confidence surveys also point to less buoyant cyclical dynamics, as their results have been trending downwards in recent months. This negative signal is reinforced by the deterioration of the leading components of the manufacturing PMI index, notably new orders and export orders.”

“In the same way that Q1 growth was too strong to last, we expect the Q2 payback to be short lived. Eurozone growth should then return to a quarterly growth rate of 0.3-0.4%. This would bring the average annual growth rate to 1.5% in 2016, the same as in 2015, followed by 1.3% in 2017. Though lacking punch, the economy will nonetheless hold above its long-term growth potential.”