Europe loses thrust in global growth risk
SLOWDOWN COULD INCREASE CAUTION AMONG POLICYMAKERS
Europe’s economy lost momentum in the first quarter as expansions slowed from France to the UK, threatening to undermine the global growth the continent previously helped power.
Figures from across the region pointed to a softer trend in the early part of the year, and US first-quarter data due shortly is also set to show activity weakening. The world’s largest economy is forecast to have grown an annualised 2 per cent, a step down from the pace seen through 2017.
The latest numbers in Europe included a slump in French economic growth and a stabilisation in Euro-area sentiment after three straight falls.
While the slowdown is partly due to storms that ripped through the region, and most officials have played it down, the European Central Bank acknowledged the shift on Thursday. If it persists, it could increase caution among policymakers about plans to pare back stimulus this year.
“Manufacturing just got stung in the first quarter,” said Claus Vistesen, an economist at Pantheon Macroeconomics. “We could slow a little bit further. The question is how policymakers react to this, because policymakers, for whatever reason, are very skittish toward data on the downside.”
Euro pressure
There’s pressure on some businesses from the euro, which has advanced 11 per cent against the dollar in the past year. L’Oreal SA earlier this month attributed a firstquarter drop in reported revenue to exchange-rate effects, despite its fastest sales growth in eight years.
The European data risks fanning speculation that the world’s synchronised boom of late-2017 is now ending, even though the International Monetary Fund last week repeated its forecast for the strongest expansion this year since 2011. Rising oil prices, fears of a trade war and jittery markets also threaten that outlook. In France, GDP rose 0.3 per cent, less than half the pace seen at the end of 2017. The UK economy eked out 0.1 per cent expansion, its worst since 2012. There was better news from Spain and Austria, with both expanding 0.7 per cent in the period. Germany, the largest economy in Europe, saw yet another fall in unemployment.