Hot off the press, yes it is official. Eurozone (18 countries) GDP grew by a whole 0.2% in Q3.2014, exceeding expectations by a whopping 0.1% (real optimism there). As you can imagine with that kind of good news we in Europe are all off on a well-earned buying spree, celebrating and adding to our Q4.2014 numbers. I last reported EU GDP Q2.2014 numbers back in August, which showed zero growth. So numbers are 0.2% better now, yippee. Let’s look at the big three: #1 Germany set the tone with +0.1%, up from a worrying -0.2%, which risked but defied recession; while #2 France posted +0.3%, after two flat quarters at 0% this is its 1st growth in 2014, (driven by a serious uplift in government expenditure) and finally #3 Italy, at -0.1% continues its no growth policy, started way back in 2011. So is there any really good news? Well yes, in what we now call the EU periphery; Greece was back (from outta space) with +0.7% and Spain with a respectable +0.5%. Overall, this news needs to be understood in the context that the Eurozone’s economy is still 2% smaller than in autumn 2008, when this Great Recession started.
Looking at 2014 as a whole, the International Monetary Fund (IMF) has stated that the UK economy will be the fastest-growing in the G7 this year, at 2.9%. This is an up from the 01.2014 estimate of 2.4%. Great. But the Paris based Organisation for Economic Co-operation and Development (OECD) projected Eurozone GDP growth at 0.8% for 2014, while observing that “High tax burdens, rigid labour laws, barriers to competition, and slow innovation dynamics weigh on growth”. And further that “Low productivity growth in the European Union (EU) has deep structural causes. Strengthening human capital, work incentives and competition, and better integrating the Single Market would boost inclusive growth.” So what to do and any help at hand? Yes indeedy, what about the G20 Summit in Brisbane, Australia, attended at enormous expence by a gaggle (too many, to get anything done?) of concerned European leaders? Well they happliy pledged 800 economic reforms, wow that will keep us busy, with over two a day for the next year... to boost growth, including the completion of the Transatlantic Trade and Investment Partnership (TTIP, read our whitepaper for more information). Dont' hold your breath. However, the pictures of our dear leaders in the clutches of koala bears, while basking in the Australian summer and Obamas, somewhat waning, sunshine were nice.
And what of 2015 GDP? The European Commission (EC) has just downgraded, in its Autumn 2014 forecast, Eurozone 2015 expected growth is 1.1%, down from 1.7% (set in 05.2014). Drilling into the detail, Germany collapsed from 2% to 1.1% and France from 1.5% to 0.7%, together they represent >50% of Eurozone GDP, so not surprisingly the overall picture is grim. The EC table, see below, shows the disparity ranging from Ireland 3.6% to Cyprus at 0.4%. This picture does leave out the UK, but with the EC forecasting UK growth at 2.7% for 2015, this will add a large and growing economic weight to the EU, lifting the average forecast for 2015. So overall, as ever, know your European countries. The world’s largest economic union is struggling to find its economic cruising speed that will ensure sustainable growth, currently dragged down by both Germany and France, there are pockets of growth that show the way forward…
