Eurozone economic growth slows to 0.1% in second quarter

CGTN Europe

CGTN Europe spoke to Marc Ostwald, Chief Economist & Global Strategist at ADM ISI.

Transcript

00:00I spoke to Mark Oswald, who's Chief Economist and Global Strategist at ADM ISI.

00:05Good to see you again, Mark.

00:06So I want to start by talking about those figures out of the United States.

00:10GDP for the second quarter, 3%, better than expected.

00:15What is America doing right? Is it those tariffs?

00:19Well, I think these are all sort of numbers which one has to look a little bit under the bonnet.

00:253% looks good, but obviously followed that contraction in Q1.

00:30It was all about the rebound in trade, which contributed 5 percentage points of this quarter's growth

00:37that contrasts with a 4% deduction in the previous quarter.

00:44The metric which most people will be looking at, and if Mr. Trump were so disposed,

00:51you could point to the fact that for another quarter, final sales to domestic buyers,

00:58which is basically what domestic demand in the United States slowed to 1.1% from 1.5%.

01:06It had been for the last two years about 3% to 4%.

01:10So that is a material slowdown.

01:13On the other hand, the core PCE deflator, which is something the Fed is sensitive to,

01:19they'd pick up a while.

01:20They'd dropped from the previous quarter, but it was higher than expected at about 2.5%.

01:25They're not really quite in their comfort zone, and certainly not something crying out for a rate cut.

01:30Well, let's talk about those Eurozone figures then.

01:33It is growing, if only just.

01:35But looking at the biggest economy, Germany, that contracted, didn't it?

01:39What's going wrong there, do you think?

01:40Well, in most of the cases, with the exception of Spain and Portugal,

01:47a lot of the slowdown relative to the first quarter was down to a payback

01:53for the front loading of production and exports that were seen in Q1,

01:58which gave us that strong number that we had in Q1.

02:00In Germany in particular, and indeed in France, despite the better-than-expected numbers,

02:08the real drag is contractions in business investment.

02:12In France, it was minus 0.8%.

02:14We don't have the details in Germany, but the statistics office said basically it was a drag on growth.

02:21There was, on the other hand, a slight pickup in both Germany and France in personal consumption,

02:28which is at least something, which is good news in the sense that consumers aren't basically shutting up shop.

02:38I want to ask you about Spain, because as you say, that outperformed, didn't it?

02:41Why is it doing better than most of the other countries?

02:44Well, one aspect is, obviously, it has a lot cheaper energy than many other countries.

02:54It's proving – and you're in these troubled times for Eurozone energy policy – well, EU energy policy, one should say.

03:04Those destinations where manufacturers can basically switch to, and Spain is definitely one of them,

03:12which have cheaper energy, which have cheaper energy, are benefiting.

03:14It's also benefiting from a solid tourist season.

03:21So those two factors are definitely major contributors to their outperformance.

03:27But unfortunately for the Eurozone as a whole, these smaller countries really cannot outweigh weakness in France, Germany and Italy.

03:37Okay?

03:37Let's pray.

03:38Let's pray.

Category

Transcript

Be the first to comment

Recommended