Chartbook 1Q18 GDP growth faltered but other data is mixed

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May 10, 2018 - Although economic optimism steadied at 112.6, sentiment faltered in the retail trade, services, and const
Chartbook NBK Economic Research Department I 10 May 2018

Eurozone > Chaker El Mostafa Economist +965 2259 5356, [email protected]

1Q18 GDP growth faltered but other data is mixed

> Daniel Kaye Head of Research +965 2259 3136, [email protected]



Eurozone GDP growth softened to 1.7% q/q annualized, its slowest pace since 2Q16.



Unemployment was steady at 8.5% in March.



April’s headline and core inflation surprised on the downside, at 1.2% and 0.7%, respectively.



Both business sentiment and economic sentiment steadied in April.



March’s retail sales growth was the weakest since October, possibly impacted by bad weather.



Lending activity to businesses and households edged higher in March.



Weaker economic data helped tighten yields on German bunds.



Eurozone equities have outperformed their global peers so far in 2Q18, up 6%.



The euro edged lower in April, affected by weaker data and higher US bond yields.

Chart 1: Real GDP growth

Chart 2: Unemployment rate

(Quarterly, %)

(%)

3.5

3.5 q/q annualized

3.0

3.0

2.5

2.5

2.0

2.0

1.5

1.5

1.0

1.0

1Q15

3Q15

1Q16

3Q16

1Q17

3Q17

12

12

11

11

10

10

y/y

1Q18

9

9

8 Mar-15

8

Sep-15

Mar-16

Sep-16

Mar-17

Sep-17

Mar-18

EZ GDP softened to 1.7% q/q annualized, its slowest pace since 2Q16, on weaker output growth and temporary factors.

Unemployment was unchanged at 8.5% in March, having shown a steady decline since May 2013.

Source: Eurostat

Source: Eurostat

DP growth Chart 3: Wage growth

Chart 4: Consumer price inflation

(% y/y)

(% y/y)

2.5

2.5

3

3 Headline inflation

2.0

2.0

1.5

1.5

1.0

1.0

0.5

0.5

0.0

0.0

1Q15

3Q15

1Q16

3Q16

1Q17

3Q17

1Q18

Core Inflation

2

2

1

1

0

0

-1 Apr-15

-1

Oct-15

Apr-16

Oct-16

Apr-17

Oct-17

Apr-18

Wages in 1Q18 grew at their fastest pace since 2Q16, perhaps reflecting some tightening in the labor market.

April’s headline and core inflation surprised on the downside, coming in at 1.2% and 0.7%, respectively.

Source: Eurostat

Source: Eurostat

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Chart 5: Bank lending

Chart 6: Retail sales

(% y/y)

(% y/y)

4

4

3

3

2

2

1

1

0

0

-1

-1

Loans to non-financial corporations

-2 Mar-15

Loans to households

Sep-15

Mar-16

Sep-16

Mar-17

-2

Sep-17

Mar-18

5

5

4

4

3

3

2

2

1

1

0 Mar-15

0

Sep-15

Mar-16

Sep-16

Mar-17

Sep-17

Mar-18

Lending activity to businesses and households edged higher in March despite weaker economic sentiment.

At 0.7% y/y in March, retail sales growth was the weakest since October, possibly impacted by bad weather.

Source: European Central Bank

Source: Thomson Reuters Datastream

Chart 7: PMI Composite

Chart 8: Economic sentiment

(index)

(index)

60

60

118

118

58

58

114

114

56

56

110

110

54

54

106

106

52

52

102

102

50 Apr-15

50

Oct-15

Apr-16

Oct-16

Apr-17

Oct-17

Apr-18

98 Apr-15

98

Oct-15

Apr-16

Oct-16

Apr-17

Oct-17

Apr-18

The eurozone’s PMI was unchanged at 55.2, but new orders growth eased on weaker expected demand.

Although economic optimism steadied at 112.6, sentiment faltered in the retail trade, services, and construction sectors.

Source: IHS Markit

Source: European Central Bank

Chart 9: Interest rates

Chart 10: German government bond yields

(%)

(%)

0.2

0.2

1.0

EIBOR 3M 0.1

0.0

-0.1

-0.1

-0.2

-0.2

-0.3

-0.3

-0.4

-0.4 -0.5

Oct-15

Apr-16

Oct-16

Apr-17

Oct-17

5 year

1.0

10 year

0.1

Overnight deposit rate

0.0

-0.5 Apr-15

2 year

Apr-18

0.5

0.5

0.0

0.0

-0.5

-0.5

-1.0 May-16

-1.0

Nov-16

May-17

Nov-17

May-18

The ECB’s policy rates remained steady with the focus on prospects for the bank’s asset purchases program.

Weaker economic data helped tighten yields on bunds, despite US 10-year yields breaching the 3% mark.

Source: Thomson Reuters Datastream

Source: Thomson Reuters DatastreamSource: QCB

NBK Economic Research, T: (965) 2259 5500, F: (965) 2224 6973, © 2018 NBK

Source: SAM

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Chart 11: Equities

Chart 12: Exchange rate

(Euro Stoxx 600)

(euro index)

420

420

400

400

380

380

360

360

340

340

320

320

300 May-16

300

Nov-16

May-17

Nov-17

May-18

Eurozone equities have outperformed their global peers so far in 2Q18, up 6%. Source: Thomson Reuters Datastream

NBK Economic Research, T: (965) 2259 5500, F: (965) 2224 6973, © 2018 NBK

112

112

110

110

108

108

106

106

104

104

102

102

100

100

98 96 May-16

98 96

Nov-16

May-17

Nov-17

May-18

The euro edged lower in April, affected by weaker data and higher US bond yields.

QCB Source: Saud

Source: Saudi Source: Ministry Thomson of Finance Reuters Datastream

www.nbk.com

NBK Economic Research, T: (965) 2259 5500, F: (965) 2224 6973, © 2018 NBK

www.nbk.com