Eurozone: Higher growth in the first quarter will not last – Commerzbank

Dr Jörg Krämer, Chief Economist at Commerzbank, notes that the euro zone economy expanded at a solid rate of 0.6% on the quarter in the first quarter of 2016.

Key Quotes

“But this figure overstates the underlying pace of growth, because the higher growth rate in the first quarter is partly attributable to calendar effects and the mild weather. We therefore expect a notable countermovement for the second quarter.

Nor is the pace of the expansion likely to pick up lastingly later this year. This is suggested by problems in emerging markets, particularly China, high levels of private debt and the correction of real estate markets in some countries.

For the whole year 2016 we still forecast only meagre growth at a rate of 1.3%. But there are
some upside risks given the surprisingly good start to the year.

Compared to the severity of the recession, the pace of the economic recovery remains modest. In Q1 2016, the economy merely returned to levels seen before the onset of the financial market crisis in early 2008.”