The Week In Hindsight, 16 May 2014
GDP figures released for both France and Germany on Thursday highlighted a growing divergence of growth prospects for the eurozone’s two largest economies. The tale of two cities showed stagnation in the French economy with nil growth (0.0%) for Q1 2014, while German GDP figures released 90 minutes later surpassed expectations.
The official German figure came in at 0.8% for Q1 VS expectations for a print of 0.7%, indicating that some observers may have underestimated the continent’s largest economy.
In addition to output figures, final inflation numbers for the month of April were also released during the week. Both measures, CPI and Core CPI, came in as expected with inflation stagnant and stubbornly below the 2% target.
Overall, while positive for Germany, the week’s releases do little to change the outlook for Europe as a whole. We continue to believe that a further loosening of monetary policy will be forthcoming from the ECB over the weeks and months ahead. This is given the low, and in some cases non existent, price pressures and lagging growth across some areas of the continent.