The preliminary estimate of euro zone Q1 GDP confirmed the first estimate, which was in line with expectations. During the first three months of the year, the euro zone economy stabilized, on a quarterly basis. The annual rate however was sharply downwardly revised, from 0.0% Y/Y to -0.1% Y/Y.
More important is the first release of the details, which was slightly disappointing. Household spending stabilized from the previous quarter when it dropped by 0.5% Q/Q and the consensus was looking for a marginal increase. Growth, on the contrary, was based in net-exports due to an 1.0% Q/Q increase in exports, while imports rose only slightly (0.1% Q/Q). Also government consumption (0.2% Q/Q) supported growth during the first three months of the year. This was however offset by a larger than expected drop in gross fixed capital formation (-1.4% Q/Q) and also change in inventories acted as a drag on growth.
The GDP breakdown suggests that it was demand from abroad which kept the euro area out of recession, while domestic demand remained disappointingly weak at the start of the new year. A slight positive sign as the drag from inventories, which might be positive for the coming quarters. Nevertheless, it is very likely that the euro area economy will fall back into contraction in the second quarter.