Eurozone GDP could pick up next quarter
Frankfurt (Jan 31) Eurozone GDP year on year missed against expectations this morning. The analysts surveyed expected a rise of 4.7% vs the previous reading of 3.9% and the number printed marginally lower at 4.6%. The quarterly figure matched the forecast of 0.3% falling well short of the 2.2% managed in the previous quarter but this was to be expected. Lloyd's Bank noted prior to the event "For the rest of the day, Eurozone Q4 GDP figures will show a marked slowdown from the third quarter, reflecting both an impact from Omicron and ongoing supply chain disruptions. We expect Eurozone growth to slow to 0.3% q/q in Q4 from 2.2% q/q in Q3."
In the next quarter, there are some better signals. The PMI for January was pretty encouraging as it remained well above 50. The jump in the manufacturing PMI was particularly impressive as it indicates that some alleviating of supply chain pressures helped output improve. The drop in service sector PMI reflects the Omicron impact, but we expect some easing of restrictive measures towards the end of the quarter.
Speaking about the most recent reading ING Bank noted "This GDP data confirms that. Of course, it still marks a slowdown compared to growth in the third quarter, but that was to be expected given the moderating rebound effects, supply chain problems, and increased coronavirus infections. The fact that GDP still continued to grow is a sign of strength for the economy."
There was a relatively muted reaction in EUR/USD but the pair had been moving away from the high point of the session near 1.1182. The pair currently is trading at 1.1152 heading into the U.S. open where the market will be looking out for comments from Fed's George and Daly.
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