Eurozone economic growth slower in the first quarter, while the UK PMI higher at 52.5 in April; FOMC left interest rates unchanged
It has been expected that the economic growth of the euro zone will be on the slower side in the first quarter, however according to Reuters, economists expect a stronger expansion this year. The GDP over the 19 countries of the EU has expanded by 0.4% in the first quarter as opposed to the last quarter of 2017 and by 2.5% year-on-year, as per EU statistics agency – Eurostat. The growth rate placed Eurozone ahead of Great Britain and behind the US, where the UK has seen the weakest growth since 2012.
The economists see the weaker growth in Q1 due to temporary factors such as, unexpected cold weather, workers strike and short-term bottlenecks. However, as per the economists at Capital Economics, with the high level of consumer confidence, it is expected that the growth will pick up in Q2 and help push quarterly GDP growth to 0.5%-0.6%.
In addition, yesterday we saw UK construction PMI rising to 52.5 in April, as opposed to the expected 50.5, with British construction activity recovering faster than expected after the snow in March. However, it seems this is not enough to alter the investors’ view of BoE leaving the interest rate unchanged in the coming week. Both the commercial building and civil engineering activity have improved, recording an unassertive return to growth after the declines in the previous months. Residential work was the best performing category of construction activity in April as the growth rate was strongest since May 2017. The PMI for much larger services sector is expected today.
With regards to the US, 204k jobs were added in April, which is slightly higher than the expected 200k. These figures came ahead the Labor Department’s non-farm payroll tomorrow that includes both private and public sector employment. In addition, investors were closely monitoring the FOMC statement, which left interest rates unchanged. The Federal Reserve continued with the narrative of gradual rate hike and with the inflation nearing 2% target, investors are now more sure of the rate hike happening next meeting in June.
Today we have the EU CPI estimate and from the UK, Services PMI readings. From the US, investors will be looking at the unemployment claims, expected at 225k, up from 209k last week that was the lowest level since December 1969. Furthermore, Canadian trade balance figures will be out, where March trade is expected to show further growth in exports with a narrowing deficit of –CAD2.5 billion from –CAD 2.7 billion.
ECONOMIC CALENDAR EVENTS FOR MAY 3RD
EUR Spanish Unemployment Change
EUR CPI Flash Estimate y/y
EUR Core CPI Flash Estimate y/y
GBP Services PMI
CHF SNB Chairman Jordan Speaks
USD Prelim Nonfarm Productivity q/q
USD Prelim Unit Labor Costs q/q
USD Unemployment Claims
USD ISM Non-Manufacturing PMI
CAD Trade Balance
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