Pressure on the ECB after weak growth figures
And that’s all for tonight. Thanks for reading, and for all the comments. A quick reminder of the key points:
Economists are urging the ECB to take fresh action at next month’s meeting, after the latest GDP data showed Europe’s recovery remained week. Reaction starts here
The eurozone economy grew by just 0.2% in the first three months of 2014, only half as fast as expected.
While Germany outperformed with a 0.8% expansion, most other countries faltered. France was stagnant, Italy and Portugal contracted, and the Netherlands’ GDP shrank sharply (although a mild winter was partly to blame). Full coverage starts here.
Forbes, a former White House advisor and current MIT professor, was named as the next interest rate setter by the chancellor George Osborne today.
Stocks and peripheral bonds have fallen today, as disappointing US data – and rumours that the Greek government could tax bond-holders — hit sentiment.
Catch you tomorrow. GW
We often talk about France being the sick man of Europe, but Capital Economics flags up that Italy is the real problem child – and here’s the evidence:
Their analyst Andrew Kenningham argues:
First, although many in the markets now assume that the Bank of England will raise interest rates at least as soon as the Fed, the gulf in the levels of GDP in the two countries suggests that there is a lot more spare capacity in the UK. Largely for that reason, we think the Bank of England will probably keep its policy rates lower for longer.
Second, the focus on levels rather than growth rates underlines that it is Italy, rather than France, which is the true “sick man” of Europe. Nonetheless, the data also highlight how France is again falling behind Germany. Moreover, we think France is likely to fall further behind in the coming years because it has much more serious structural problems and, unlike Germany, will also need to tighten fiscal policy.
Europe’s stock markets have closed with losses across the board — particularly in the peripheral countries.
Italy’s FTSE MIB is the big faller, shedding almost 3.7%. There are also heavy losses in Portugal (-2.8%), and Spain (-2%).
And as flagged up at 3.44pm, there’s been a selloff in peripheral bonds too.
The appointment of Kristin Forbes to the Bank of England’s rate-setting committee has been hailed by two top US academics, who say she’s a great addition to the UK central bank.
Professor Simon Johnson, an MIT colleague of Forbes, told my colleague Larry Elliott:
“I know her very well. She’s a terrific appointment. It’s an extremely good idea for any central bank to bring in outside perspectives from people who understand how a globalised world works, including people with policy experiences.”
Johnson said it was “standing room only” for Forbes’s lectures at the Sloan Business School at MIT, adding:
“She is one of our most successful teachers. She is a great communicator, who takes complex ideas and makes them understandable without losing any of the nuances.”
Johnson added that Forbes was considered the world’s leading expert on capital flows across countries and had also written an influential paper on inequality.
Harvard professor Ken Rogoff said the assumption in the US was that Forbes would get a top economics job in the US if the Republicans win back the White House – either as chairman of the Council of Economic Advisers or by joining the Federal Reserve, America’s central bank.
“She’s a very clear and articulate economist”, Rogoff said. “She doesn’t come with any preconceived notions. She is very strong on international macro-economic issues”.
The other reason for today’s selloff is that US factory orders for March have been revised down, to +0.9% from +1.1% before.
That suggests the US economy actually contracted in the first three months of this year, by more than -0.2% (or -0.9% on the annualised favoured by American economists).
There’s a real risk-off feeling in the market this afternoon, sending bond markets sliding and also hitting sovereign debt issued by Italy, Spain and Greece.
The FTSE 100 isn’t immune either, with the blue chip index shedding 52 points to 6825, a fall of 0.7%. No chance of hitting the alltime high of 6930 achieved at the end of 1999.
Italian government bonds have fallen sharply, pushing up the yield (or interest rate) on 10-year bonds to 3.07% from 2.91% last night.That’s a significant move in one day, but also means Italian bonds are still rather highly valued. (remember the days of 2011, when yields topped 7%?)
So what’s happened?
One factor is the news that US industrial production fell 0.6% last month (as mentioned earlier).
But traders were also spooked by a report Greece might impose a retrospective capital gains tax on foreign bond-buyers, who have made large profits on Greek debt.
It’s been denied by Athens, but Greek bonds are still suffering. That’s pushed their 10-year bond yields up to 6.8%, from 6.3%. Quite a big move
Today’s weak GDP data is weighing on Europe’s stock markets.
The Italian FTSE MIB has now shed 2.7%, or 573 points to 20,612, following the news that the Italian economy shrank by 0.1%.
And the Spanish IBEX has fallen 2%, even though its economy grew by 0.5% in the first quarter.
According to sources, the Treasury wrote to 80 potential candidates suggesting they might apply for the vacancy on the Monetary Policy Committee — before ultimately appointing US academic Dr Kristin Forbes.
Larry Elliott writes:
The Treasury said there had been 34 applications for the MPC job after it was advertised last month, ten of which were from women. A three-person panel including Kate Barker, the last woman on the committee, conducted interviews and made recommendations to the chancellor.
Treasury sources said there had been an effort to find more women applicants. Dave Ramsden, the Treasury’s chief economic adviser, sent out 80 emails to potential candidates, split evenly between men and women.
Back to the big story of the morning, Europe’s weak growth figures.
Economics editor Larry Elliott writes that Mario Draghi should consider copying the UK’s Funding for Lending Scheme, to drive lending in the euro area.
It’s really not happening in the eurozone. An already feeble recovery lost momentum in the first three months of 2014 and the signs are no better for the current quarter. The 18-nation single currency area is nowhere near achieving escape velocity, the rate of expansion that would start to make inroads into mass unemployment and prevent the drift towards deflation. Action from the European Central Bank next month is inevitable.
The nugatory growth in early 2014 was all the more disappointing because of an unusually mild winter. That had led economists to expect activity to pick up by 0.4%; instead it was just half that figure, a weaker performance than in the final three months of 2013. Had it not been for the robust growth posted by Germany, things would look even more dismal.
Some of the weather-related boost to output will be paid back in the second quarter. In addition, there have been signs recently that the tension in Ukraine is eating into business and consumer confidence. China’s slowdown will have an impact on Germany’s export-dependent economy. For those reasons, it is hard to see growth accelerating in the second quarter…..
Maybe the US economy isn’t healing as well as we thought. Industrial output across the country fell by 0.6% in April, defying expectations it would be unchanged.
Over to Greece, where the countdown to European and local elections (the first round of the latter taking place this weekend) has sent passions skyrocketing.
Protestors, including fired school guards who have been demonstrating outside the country’s administrative reform ministry since early this morning, see the double poll as the ideal chance to vent their spleen.
Our correspondent Helena Smith reports:
The mood outside the administrative reform ministry is as explosive as each of the protestors now gathered outside it. With dismissed school guards vowing to remain on the streets “for as long as it takes” authorities have dispatched vanloads of riot police to the area.
Scuffles have intermittently broken out as the guards, who were laid off as part of plans to streamline Greece’s bloated public sector, have tried to enter the building.
Harris Bastas who heads the group now representing the 2,000 offloaded school guards told me: “right now we want to meet the minister [Kyriakos Mitsotakis] and if it takes one, two, three days we will stay here. In fact as long as it takes. Our basic demand is to be reinstated. We want the jobs that we lost in one night,” he yelled, screaming himself hoarse. “We want what every state should guarantee its citizens: the right to live with dignity.”
Mitsotakis, who is under immense pressure to trim the civil service from Greece’s “troika” of creditors at the EU, ECB and IMF, has shown no inclination to meet the guards. Down the road irate finance ministry cleaners, who also lost their jobs at the end of March after being put into a special labour reserve, are similarly demonstrating. Now the emblem of austerity’s corrosive effects, the women have become increasingly organised, establishing a stall outside the national economy ministry from where they distribute leaflets describing their plight.
Our full story on the IMF’s warning to France is now live:
Just in – the number of Americans signing on for unemployment benefit has dropped to its lowest level in seven years.
Just 297,000 new jobless claims were filed last week, the lowest level since May 2007 (the dawn of the credit crunch)
And the US inflation rate has also picked up by its fastest rate since last July. The consumer prices index rose by 2.0% on an annual basis in April, with prices up by 0.3% month-on-month.
Two signs that the US economy is picking up pace, after stalling over the winter.
Here’s some instant reaction to Kristin Forbes’s appointment to the Bank of England’s monetary policy committee:
Dr Kristin Forbes, the US academic just named as the newest member of the Bank of England’s monetary policy committee, is an expert in “financial contagion”.
Bloomberg wrote last year that:
When Kristin Forbes sought tenure at the Massachusetts Institute of Technologyearly last decade, some colleagues said her research focus on financial contagion led to a dead end. Her reaction: Full speed ahead.
Forbes worked to safeguard global financial stability with then-U.S. Treasury Undersecretary John Taylor, became the youngest member ever on the White House Council of Economic Advisers and eventually won tenure at MIT. In August she presented the opening paper at the Federal Reserve’s annual symposium in Jackson Hole, Wyoming.
“Kristin is one of the leaders in the empirical analysis of contagion,” said Roberto Rigobon, who, like Forbes, is a professor of economics at MIT’s Sloan School of Management in Cambridge, Massachusetts, and has co-written research with her on the topic. “Her papers are a tour de force for anyone interested in measuring” its “importance, existence and extent.”
Here’s the full profile: Contagion Thesis Once Derided Proven by Kristin Forbes
Dr Kristin Forbes to join the Bank of England’s MPC
Just in: the next member of the Bank of England’s monetary policy committee has been named.
Dr Kristin Forbes, currently Professor of Management and Global Economics at MIT’s Sloan School of Management, will join the rate-setting committee in July.
Chancellor George Osborne says Forbes is “an economist of outstanding ability with real practical experience of policy making.
She will make an exceptionally strong addition to the MPC. It’s a sign of the high regard in which the Bank of England and our monetary framework are held around the world that someone of Kristin’s ability wishes to be part of them”.
According to Forbes’ web page at MIT, she was the youngest ever person to serve on the White House’s Council of Economic Advisers. She’s also worked for the U.S. Treasury Department, and was a Davos “young Global Leader”.
She is a research associate at the NBER and a member of the Bellagio Group, Trilateral Commission, and Council on Foreign Relations. She is on the Panel of Economic Advisers for the Congressional Budget Office and the Academic Advisory Board for the Peterson Institute for International Economics and the Center for Global Development. She has won numerous teaching awards and teaches one of the most popular classes at MIT’s Sloan School. Before joining MIT, Forbes worked at the World Bank and Morgan Stanley.
Correction, the chairman of Lloyds is Lord Blackwell, not Sir Win Bischoff (Blackwell’s predecessor) as I wrote earlier.
As if France wasn’t under enough pressure, the International Monetary Fund has dealt Francois Hollande another blow by questioning whether his new fiscal plan is achievable.
In a new review of the French economy, the IMF questioned whether France will manage to cut public spending fast enough to bring its deficit down to 3% by 2015, given Hollande’s pledge to also cut payroll taxes (paid by on companies).
The IMF warned that France cannot afford to waver on its spending cuts:
“Achieving the deficit objectives while delivering on the tax cut commitments leaves no room to deviate from the announced expenditure reductions,” the IMF said in a regular review on the French economy.
“The major risks are that the initial plans may be diluted in sequential annual budgets and that cuts in transfers to local governments may be compensated by unsustainable cuts in investment, higher taxes or higher debt,”
Good news – the security scare at the Bank of England is over.
The chairman of Lloyds Banking Group, Lord Blackwell,
Sir Win Bischoff, has told shareholders at the bank’s AGM in Edinburgh today that the Scottish referendum on independence means “uncertainties for everyone”.
But Blackwell also said Lloyds didn’t hold a ‘corporate view’ – it’s a matter for Scotland.
- 15-May-2014 12:22 – LLOYDS BANK CHAIR SAYS ‘UNCERTAINTIES FOR EVERYONE’ AHEAD OF SCOTS INDEPENDENCE VOTE
- 15-May-2014 12:17 – LLOYDS BANK CHAIRMAN SAYS NOT PLANNING ANY MOVES AHEAD OF SCOTTISH INDEPENDENCE VOTE
- 15-May-2014 12:18 – LLOYDS BANK CHAIR SAYS WILL WORK WITH RELEVANT AUTHORITIES IN EVENT SCOTS VOTE FOR INDEPENDENCE
- 15-May-2014 12:21 – LLOYDS BANK CHAIR SAYS INDEPENDENCE MATTER FOR SCOTS, BANK HOLDS NO CORPORATE VIEW
Meanwhile in the City, the Bank of England has announced that it has moved staff to “safe areas”, as police investigate a car which has been abandoned outside the central bank headquarters.
Work continues as usual (despite the Bank tube station area being cordoned off), and there’ s no reaction in the financial markets.
Here’s the BoE statement:
Bank of England response to suspect vehicle
Following reports of a suspect vehicle near the Bank of England, the Bank has moved staff to safe areas of the building. All essential operations continue from those areas.
Today’s growth (and non-growth) readings are a “sobering reminder” that the eurozone isn’t out of the woods yet, says Aengus Collins, Europe Analyst at The Economist Intelligence Unit.
Over the past year or so, most forecasters have been toning down the language that they use in relation to the euro zone’s economic woes, with Mario Draghi’s monetary activism (by ECB standards, at any rate) seen as a game-changer. In some respects that is correct. The euro zone is no longer gripped by a crisis of existential proportions.
But this morning’s data highlight the fact that the absence of crisis isn’t the same as the presence of recovery.
And while Germany is recovering strongly, this isn’t feeding through to its neighbours, Collins added:
France stagnated in the first quarter and Italy contracted. These two major economies are struggling to sustain even a tentative recovery. Italy is now likely to expand only slightly for the full year (and it would take very little for it to contract) while the first quarter in France will shave a few tenths off growth for the year that was already relatively weak at 0.8%.
Also of concern is the sharp contraction of 0.7% recorded in Portugal, just as that country prepares to exit its EU/IMF bailout.
Analysts at BNP Paribas agree that the ECB must act in June, especially as Mario Draghi said last week that the governing council is not happy about the path of inflation.
Weak eurozone growth: what the analysts say
The European Central Bank cannot leave monetary policy unchanged at next month’s meeting, argues James Ashley, chief European economist at RBC Capital Markets:
“The debate over ‘whether’ to act is surely over and it is now just a question of ‘how’ to act.”
Yesterday, it emerged that the ECB is preparing a package of possible measures – from cutting interest rates to stimulating small business lending.
Tom Rogers, senior economic adviser at EY, said today’s data should be “a wake-up call” for any eurozone policy makers who are complacent that Europe is safely on the road to recovery:
Rogers argues that Italy and France are paying the price for not reforming their economies (via AP):
“Stagnating output in Italy and France, two of the four largest economies, is in large part a result of deteriorating cost-competitiveness, while Germany and Spain continue to reap rewards from reform implemented either well before the crisis, or more recently.”
Howard Archer of IHS Global Insight is hopeful that the eurozone will pick up momentum through this year (recent surveys have been quite positive), arguing:
Reduced fiscal squeezes, very accommodative monetary policy (which now seems likely to augmented in June) and sharply reduced sovereign debt tensions are supportive to Eurozone growth, while global growth is seen picking up gradually.
In addition, consumers’ purchasing power is being helped by muted consumer price inflation (just 0.7% across the Eurozone in April) while Eurozone labour markets have largely stabilized and in some cases are even improving modestly.
(the -1.4% contraction at the bottom of the chart is the Netherlands, if you can’t see it clearly)
On a brighter note, Europe did grow faster than the US for the first time in three years.
Bad weather left the American economy struggling to expand over the winter — its GDP rose by just 0.05% on a quarterly basis.
The wider European Union grew by +0.3% during the first quarter, beating the eurozone’s +0.2% growth.
Strong growth in the UK (+0.8%), Hungary and Poland (both 1.1% q-on-q) helped the EU outpace the euro area.
That means the EU economy is 1.4% larger than in the first quarter of 2013, according to Eurostat, while the eurozone is +0.9% larger.
Greece’s economy has contracted by around a fifth since the crisis began, and is currently 1.1% smaller than a year ago. Here’s a chart from Trading Economics showing the details:
Cyprus continued to suffer from its austerity programme, and the trauma of last year’s bailout crisis which left its banking sector on the mat.
The Cypriot economy shrank by 0.7% during the last quarter, and is now 4.1% smaller than a year ago.
Is there a glimmer of hope in Greece’s GDP data, just released?
Greece’s economy has shrunk by 1.1% over the last year, which is the smallest annual contraction since the debt crisis began in 2010. That’s also less severe than the 1.5% slump which economists expected.
I”m afraid we don’t get quarter-on-quarter data for Greece — ie, how it fared since the October-December period. So we don’t have a quarterly growth data.
Not only is Europe struggling to grow, its inflation rate is worrying low.
Eurostat reports that prices rose by just 0.7% across the euro area in April, which confirmed its flash estimate. That’s well shy of the European Central Bank’s target of just below 2% .
Eurozone grows by just 0.2% in last quarter, weaker than forecast
BAD NEWS: The Eurozone grew by just 0.2% in the first three months of this year, dragged down by stagnation in France, and contraction in Italy, Portugal and the Netherlands (see earlier summary).
That’s much weaker than the 0.4% growth that analysts had expected, and raises fresh fears that the eurozone recovery is running out of steam.
Reaction to follow!
Eurozone GDP – a country-by-country catch-up
Time for a very brisk recap before we get the overall figure for Eurozone GDP at 10am sharp (and updated inflation data too):
And the big picture is that the eurozone recovery story has taken a battering this morning with only Germany outperforming in the first three months of 2014.
German GDP beat forecasts, growing by 0.8%, thanks to a mild winter and solid demand from home and abroad.
But France’s economy has stalled, with GDP unchanged in the quarter.
Italy is shrinking again, with GDP down 0.1% – ending its short escape from contraction
Portugal has suffered a contraction, down 0.7%.
The Netherlands economy suffered from the warm winter, with GDP shrinking by an alarming 1.4%.
And Finland is in recession, after GDP fell by 0.4%
And here’s the latest reaction:
Portugal’s GDP drops by 0.7%, defying hopes of growth
And now we get bad news from Portugal — its GDP fell by 0.7% in the first three months of this year, dashing hopes that it would keep expanding.
It’s one disappointment after another…. apart from Germany
Finland’s recession adds to euro malaise
Finland has also added to the gloom in the eurozone, sliding into recession with a 0.4% drop in GDP in the first three months of this year.
That follows a 0.3% contraction in Q4, and economists are concerned that the once-healthy Finnish economy is on the slide.
As Nordea analyst Jan Von Gerich put it: “It doesn’t look too good”, adding:
“Zero growth from the full-year is starting to look like an achievement for the economy
“If the situation in Russia gets worse, it will become a year of contraction.”
Andrew Balls, deputy chief investment officer at Pimco (and brother of the UK shadow chancellor) is discussing the eurozone GDP data on Bloomberg TV now.
On today’s laggards, France and Italy, Balls says that “two countries* who have not done a lot of economic] reforms are broadly flat in terms of activity.”
But he is more optimistic about the eurozone as whole, which is returning to trend-like growth….”a big improvement on where have been in recent years”.
Spain, and many smaller countries are also doing quite well, Balls adds (Spanish GDP was released last week, and rose by 0.4%)
* – not countries as I initially mistyped – apologies all
We also have decent growth data from Poland – the economy grew by 3.3% over the last year (I can’t find quarter-on-quarter figures, sorry)
That’s good, but not quite as good as Hungary’s 3.5% annual growth (which I covered here)
This chart, from ISTAT, shows how the Italian economy is shrinking again (-0.1%) having grown by just 0.1% in October-December after shrinking for nine straight quarters.
Italian GDP shrinks by 0.1%
ITALY’S ECONOMY HAS CONTRACTED AGAIN.
Italian GDP fell by 0.1% in the first quarter of the year, dashing hopes of 0.2% growth.
That’s an alarming development. Italy had only just clawed its way out of recession three months ago.
Today’s data means it has contracted by 0.5% over the last year. For all the talk of European recovery, Italy is still in a mess.
The euro has fallen this morning, as the weak French growth figures put more pressure on the ECB to act. It’s dropped 0.3% to $1.3673
Another gloomy statistics in the Dutch GDP report — in the first quarter of 2014 there were 112 thousand employee jobs less than a year earlier.
But the Central Bureau of Statistics also struck a note of optimism, saying Netherlands’ industrial base continued to recover.
Netherlands GDP falls by 1.4%
Shocking figures from the Netherlands.
Its economy shrunk by 1.4% in the first three months of this year, much worse than the 0.0% which economists had expected. That means its economy has contracted by 0.5% since the first quarter of 2013.
So what on earth happened?
Apparently this meant natural gas consumption by households was almost a third lower than a year earlier. Consumers also spent less on food and beverage, partly because Easter in 2014 fell in April rather than March.
This chart (via Yannis Koutsomitis) shows how Germany has now posted its strongest period of growth since 2011, having grown by 0.8% in the last quarter.
(the blue line is Markit’s monthly PMI survey of business leaders)
German DAX hits record intraday high
Germany’s DAX stock index has just hit a new record high, as traders in Frankfurt react to the news that German growth beat forecasts in the last three months.
GERMANY’S DAX .GDAXI HITS ALL-TIME HIGH AT 9,810.29 POINTS – RTRS
The FTSE 100 index is up 12 points this morning at 6890 points –marching towards the alltime closing high of 6930 set in 1999.
France’s CAC index is lagging, down 0.1%.
The Czech Republic has matched France’s weak performance, with no growth at all in the last quarter.
That’s actually better than expected — economists had feared a 0.2% contraction, following strong growth in Q4 2013.
The Czech stats body says manufacturing has recovered from a low base in 2013 (hurt by an 18-month recession), thanks to growing demand from abroad and at home.
Romania’s economy appears to have slowed in January-March, with quarterly growth of just 0.1%.
But year on year, its economy has grown by 3.8%, ahead of forecasts (according to Reuters), thanks to strong exports.
Hungary has beaten expectations with some healthy-looking GDP data. Its economy grew by 1.1% in the last quarter, and is 3.5% larger than a year ago.
The Central Statistics Office said the Hungarian construction and industry firms drove growth.
Austria’s GDP rises by 0.3% in Q1, missing forecasts
Austria’s economy grew by just 0.3% in the first three months of 2014, weaker than the 0.5% expected.
And growth in the final quarter of 2013 has been revised up to +0.4%, from +0.3% initially.
Statistics body WIFO reported that domestic consumption was weak, although exports were stronger.
Exports rose by 1.5% in the quarter, WIFO said, while imports were up by 1.1%.
France’s stagnation means it will be much harder for Paris to achieve its goal of 1% growth through 2014….
Another missed target for Hollande, who didn’t manage to get unemployment falling by the end of 2013 either…
France stagnates, Germany powers ahead – what the readers say
Readers are already having their say in the comments below (thanks, as ever, all of you). Please keep them coming .
Here’s some early reaction:
There’s lots more GDP data to come, including
- Austria and Slovakia in a few moments (8am BST)
- The Netherlands at 8.30 a.m.
- Italy at 9am
- The eurozone as a whole: 10am
Antonio Garcia Pascual, chief eurozone economist at Barclays, says France’s economy was dragged back by “very weak” business investment and household consumption during the last quarter.
He’s particularly concerned about the 0.9% drop in investment — which suggests anxiety about Francois Hollande’s economic programme, including tens of billions of euros of cuts to public spending over the next few years.
Dixons and Carphone agreed £3.7bn merger
Breaking away to the UK briefly, Carphone Warehouse and Dixons have agreed to merge and create a new high street giant.
The new company, called “Dixons Carphone plc”, is designed to create “a leader in European consumer electricals, mobiles, connectivity and related services” (they say here)
It brings together Carphone’s mobile technology outlets and Dixons electrical shops (fastFT neatly dubs it the “tablets meet toasters” merger).
The deal is worth £3.7bn. Carphone chairman Charlie Dunstone reckons:
“This is a new chapter for both businesses and we are energised and proud to be part of what will be another fantastic journey for consumers and shareholders.”
There is SOME good news for France, alongside its disappointing growth data. INSEE has revised last year’s data, and concluded that the French economy was larger than it first thought in 2012.
This means last year’s debt-to-GDP ratio has been cut to 91.8%, from 93.5%, while the public deficit was revised down to 4.2% from 4.3%. That makes it a little easier for Paris to meet the deficit targets agreed with Brussels.
Credit Agricole’s Frederik Ducrozet is also struck by the comparison between Europe’s two largest economies.
The UK also grew by 0.8% in the January-March quarter, according to data released last month, matching Germany’s performance (let’s hope this doesn’t go to penalties)
Economist Shaun Richards flags up another worrying point in today’s data — French imports rose in the last quarter, while exports slowed down.
The German finance ministry says the country’s economy benefitted from a mild winter, and decent domestic demand.
German economy grows by 0.8% in Q1 2014
GERMANY beats forecasts – with growth of 0.8% in the first quarter of 2014. That’s a little stronger than expected (economists expected +0.7%).
SUCH a contrast with France’s stagnation….
As well as that 0.5% slump in French household spending, INSEE also reports that capital spending dropped by 0.9% in the last quarter.
This chart from INSEE shows how inventories rose, suggesting companies stockpiled goods as demand wavered.
Jonathan Ferro of Bloomberg sums France’s (non) growth figures up:
Dominique Barbet, an economist at BNP Paribas SA in Paris, tells Bloomberg that consumer spending (which fell 0.5%) dragged down the economy. He’s concerned that France’s growth prospects look rather modest.
“What’s worrying beyond the first quarter is that the level of growth is weak. There’s no acceleration. We don’t have the recovery that other countries are seeing.”
Disappointment as French growth stalls
Eurozone GDP day has begun with bad news — the French economy stagnated during the first three months of 2014 as consumer spending slumped.
INSEE reports that GDP was unchanged over the quarter, a new blow to Francois Hollande’s already pummelled government.
Economists had expected growth of 0.2% — which would have been bad enough.
INSEE reported that consumer spending fell 0.5% in the first quarter, showing French households are struggling. Investment by nonfinancial companies also fell 0.5%.
Reaction to follow….
Eurozone GDP released today
Good morning, and welcome to our rolling coverage of the financial markets, the world economy, the eurozone and business.
And we’re heavily focused on the eurozone today, with the release of new growth data from across the region for the first three months of 2014.
It’ll show whether Europe’s economy continued to claw its way back from the recession which ended last summer. And there’s particular focus on France, given fears that the second largest country in the euro area is struggling.
I’ll be covering all the data for the next few hours, building up to the overall eurozone growth figure at 10am BST.