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German ZEW economic sentiment missed the forecast; Eurozone GDP growth slower in the 1st quarter

May 16 • Morning Roll Call • 219 Views • No Comments

Yesterday the German ZEW economic sentiment numbers came close to levels last seen in 2012, emphasizing the ongoing concerns of the health of the EU’s largest economy. While the analysts were expecting the index to improve to -8.0 points, the ZEW Center for Economic Research came with -8.2 points in May. To explain the numbers – a level above 0.0 is an indication of optimism, while level below 0.0 indicates pessimism in terms of the state of given economy. German’s economy grew by only 0.3% in the 1st quarter, which is the slowest rate since the 3rd quarter of 2016.

In addition, the overall growth of the Eurozone economy slowed in the 1st quarter. According to Eurostat, the euro area economy grew by annualized 2.5% in the first 3 months, which is in line with the preliminary estimate, but still the 2.5% is still down from the 2.7% annual growth in the 4th quarter. On this note, ECB President, Mario Draghi has stated earlier in April that there is an overall awareness of the moderate pace the euro area is taking to recover, however signaled no change in the monetary policy and majority of analysts now believe that the ECB may give markets an update on the plans to commence winding the stimulus program in July, instead of June as previously expected.

With regards to the US, the retail sales have increased just moderately in the previous month, with the actual number coming at 0.3% as opposed to the forecasted 0.4%. The cause for the moderate rise can be the rising gasoline prices that weighted on discretionary spending. The consumer spending grew at its slowest pace in almost 5 years, during the delays in processing tax refunds. If the latest increase in gasoline prices continues, it can overcome the impact of lower income taxes on consumer spending. The consumer spending grew at 1.1% annualized rate in the 1st quarter, while the economy expanded at 2.3% pace from January to March.

Tomorrow we have high impact news coming from the EU, Canada and the US. Main attention will be on Presidents Draghi speech. From Canada the manufacturing shipment values are expected to rise to 2.0% in March, after the 1.9% gain in February, and finally from the US, the investors will be looking at the building permits and housing stats mostly.

ECONOMIC CALENDAR EVENTS FOR MAY 16th

EUR German Final CPI m/m
EUR Final CPI y/y
EUR ECB President Draghi Speaks
CAD Manufacturing Sales m/m
USD Building Permits
USD FOMC Member Bostic Speaks
USD Housing Starts
USD Industrial Production m/m

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