On Wednesday March 7th 2018, Eurostat which is the European Union’s statistical office, is going to release the final data regarding the Eurozone’s Gross Domestic Product (GDP) growth for the fourth quarter (Q4) of 2017. The GDP is one of the most comprehensive measures of the economy’s output since it provides key information on how much it grows or shrinks on a quarterly or a yearly basis.
Eurozone GDP Q4 2017 forecast
According to economists’ forecasts, the Eurozone’s GDP grew by 0.6% in the last quarter of 2017, on a quarter-to-quarter basis. The figure is anticipated to be 0.1% lower than the 0.7% recorded in the third quarter of 2017. On an annualized basis, the Eurozone’s GDP is expected to have expanded by 2.7% in the fourth quarter of 2017. If confirmed, the annual Eurozone GDP expansion rate would come in at 2.5%, which would be the fastest growth rate in the last ten years. Back in 2007, and before the financial crisis had started, the Euro-Bloc’s GDP had expanded by 3.0% on a year-to-year basis, according to Eurostat’s data.
A report published, on January 30th 2018, by ING (Internationale Nederlanden Groep) said that “economic growth has shifted to a substantially faster growth path over the course of 2017, and current GDP data confirms that. Eurozone growth for 2017 as a whole was stronger than many advanced markets, like the United States and the United Kingdom for example.” ING’s analysts noted that “it seems that the Eurozone economy continues to fire on all cylinders. Investment has yet to fully recover from the crisis but has been an essential contributor to growth during the year.” The report said that “the big question for 2018 is whether the stronger euro will offset the effects of improving external demand. The high growth in Q4 means that the carry-over effect for 2018 is very favourable.”
Eurozone’s GDP growth main drivers
The Eurozone’s GDP represents the average of the sum of GDPs from every country in the bloc. The Eurozone’s GDP growth rate also serves as an indicator of the economy’s activity level. The German and the French economies seem to be leading the way towards Eurozone’s economic recovery.
Destatis, which is the German Federal Statistical Office, released preliminary data regarding the country’s GDP in mid-February 2018. Data showed that the German GDP growth rate ticked lower in the fourth quarter of 2017, coming in at 0.6% on a quarter-to-quarter basis, in line with analysts’ expectations. The report showed that the expansion in the fourth quarter of 2017 was driven by the external sector with exports increasing substantially on a quarterly basis. The survey by Destatis revealed that the German economy expanded by 2.2% in 2017, much better than the 1.9% growth rate recorded in 2016.
According to the French National Institute of Statistics and Economic Studies (INSEE), the French economy grew by 0.6% on quarter in the three months to December 2017. The INSEE report, released on February 28th 2018, showed that the French GDP increased by 2.5%, on an annualized basis, surpassing analysts’ expectations for a 2.4% figure. This was the highest rate of growth recorded in France since 2011.
Eurozone’s GDP and the effect on the euro
The release of GDP data is a factor that could create market volatility. A figure that indicates robust GDP growth or a figure that exceeds economists’ expectations could strengthen the euro. On the contrary, a low GDP growth rate figure or a figure that misses expectations could weaken the euro’s value against its major competitors such as the US Dollar (USD), the British Pound (GBP) or the Japanese Yen (JPY).
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