The euro area economy managed to avoid a technical recession. According to the advance estimate, euro zone GDP stabilized in the first three months of the year, while the consensus was looking for a second consecutive quarter of contraction (by 0.2% Q/Q). The breakdown will only be available with the release of the preliminary figure, published on the 6th of June. National GDP data show that the upward surprise was mainly due to a strong performance of Germany (0.5% Q/Q), Belgium (0.3% Q/Q) and against all expectations, Greece (-6.2% Y/Y from -7.5% Y/Y). Also Portuguese GDP surprised on the upside of expectations, contracting only marginally (-0.1% Q/Q), while a decline by -1.0% Q/Q was expected. While the breakdown is not yet available, net exports probably supported GDP, while a significant drag is forecast from the construction sector, due to the bad weather. While the data are of course positive news, the outlook for Q2 remains especially uncertain as the PMI’s weakened further in April and austerity measures in Italy and Spain will probably be felt harder in the second quarter.
For the first time in six months, the German ZEW indicator weakened in May. The headline (expectations) index dropped from 23.4 to 10.8, while the consensus was looking for a more moderate decline to 19.0. The current assessment index, on the contrary, improved for a second straight month, rising from 40.7 to 44.1, the highest level since August last year. A ZEW economist said the elections in Greece and France had probably contributed to the decline, while also the intensification of the debt crisis weighed on sentiment