Eurozone GDP: Spain beats forecasts but France suffers trade blow – bu…

Austria’s growth rate has dipped, to 0.3% in January-March from 0.4% in October-December 2018.

Although household spending and business investment rose, trade growth weakened — a problem also suffered by France of course.

Inga Fechner of ING explains:

While household and public consumption expenditure held up nicely, each rising by 0.4% quarter-on-quarter, exports and imports lost momentum. The cooling world economy and especially the cooling of the European industrial economy has started to leave its mark on Austria.

Although imports rose moderately (+0.4%) in line with investment demand, exports expanded to the same extent, resulting in hardly any contribution to GDP growth in the first quarter.

Bloomberg is also cheered by the jump in Spain’s growth rate, calling it an encouraging sign for European growth.

Spain’s economy unexpectedly picked up pace, adding to signs that a slowdown in the euro area may be on the verge of turning.

Spain has consistently outgrown the 19-country region since the start of 2018 and expanded 0.7 percent in the first quarter. A gradual fall in unemployment and higher wages have given a sustained boost to consumer spending, a motor of the Spanish economy, offsetting weaker export demand.

Getting back to the growth figures…and this chart shows how Spain’s economy has now been steadily growing since 2014:

UK hotel chain Whitbread is also under pressure this morning, after warning the Brexit uncertainty is hurting its Premier Inn business.

Alison Brittain, Whitbread’s CEO, warned that there are ongoing signs of market weakness across both business and leisure, especially in the UK regions.

That suggests both consumers and companies have been cutting back on travel, while they watched the political crisis in Westminster unfold.

She told shareholders:

In the fourth quarter, we saw a decline in business and leisure confidence, leading to weaker domestic hotel demand. This weakness has increased into March and April particularly in the regional business market, coinciding with an acute period of political and economic uncertainty in the UK. At this stage in the new financial year it is too early to know how business confidence and its impact on the market will evolve.

Statutory profits at the group, which sold its Costa Coffee business to Coca-Cola for £3.9bn in January, shrank by 40% in the last year. Shares have dropped by 2.6% in early trading.

In the City, shares of mining companies have fallen after China’s factory growth unexpectedly stalled last month (see 7.34am).

Coal and iron ore giant Glencore are the biggest faller, down 3%, with BHP Group and Rio Tinto both shedding 1.5%.

But that’s balanced out by Standard Chartered; up 4% after announcing a $1bn share buyback earlier today.

The pick-up in Spain’s growth rate is a positive signal for Europe’s economy, say financial analysts.

Here’s Simon Harvey of Monex Europe:

This is from currency analyst Marc-André Fongern:

And here’s Michael Brown of Caxton.

Newsflash: Spain’s economy has accelerated in the last quarter, growing more than twice as fast as France.

Spanish GDP expanded by 0.7% in the first three months of this year, its National Statistics Office reports, beating forecasts.

That’s up from 0.6% in October-December, showing that Spain’s economy gained some momentum in recent weeks.

On an annual basis, Spain’s economy has grown by 2.4% compared with Q1 2018 – again, a solid result.

Reaction to follow

Given today’s data, French and Chinese manufacturers will both be hoping for a trade war breakthrough soon.

US officials have landed in Beijing today for fresh talks to end the dispute that has led to tariffs on hundreds of billions of dollars of exports.

Speaking to reporters at his hotel, US treasury secretary Steven Mnuchin said he hopes to make progress:

“We’re looking forward to productive discussions over the next few days.”

Overnight, some disappointing Chinese manufacturing data has undermined hopes that the global economy was picking up.

China’s factories barely grew at all in April, according to the country’s National Bureau of Statistics. It’s official manufacturing PMI, which tracks activity, shrank to 50.1 in April from 50.5 in March. That level indicates stagnation – implying that the trade war with America is still biting.

Those trade disputes are surely also a factor behind the erosion of French export growth last quarter.

Although any growth is welcome, a 0.3% quarterly growth rate is rather mediocre.

And as Philippe Waechter, chief economist at Ostrum Asset Management points out, French GDP has now been subdued for over a year.

This chart illustrates how the halt in French export growth dragged its economy back in the last quarter (the green bar).

The red bar is also significant – that’s companies swelling their inventories.

More encouragingly, French household spending grew by 0.4% in the last quarter (having flatlined in October-December). That suggests that consumer confidence might be picking up.

French businesses also kept investing in new equipment and facilities — this ‘gross fixed capital formation’ rose by 0.3% (down slightly on the previous quarter).

This means that domestic demand made a positive boost to France’s economy.

Digging into France’s GDP report a little, it’s clear that the slowdown in global trade has hurt companies.

Export growth almost ground to a halt in the first three months of 2019, rising by just 0.1% (from 2.2% growth in Q4 2018). Imports also slowed, to 0.9% from 1.2% in Q4 2018.

The drop in exports means that net trade wiped 0.3% off France’s growth rate.

Companies also expanded their inventories — suggesting that they have been stockpiling goods rather than selling them on the markets. This inventory building added 0.3 percentage points to France’s growth rate — implying that total growth would have been flat otherwise.

Newsflash: France has got GDP Day up and running by reporting another quarter of growth.

The French economy expanded by 0.3% in January-March this year, new figures from stats body INSEE show.

That matches its growth rate in the last quarter of 2018, and suggests that the Gilets Jaunes protests that gripped Paris recently have not stalled the economy.

More to follow….

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Today we learn whether Europe’s economy is still stuck in a rut, when new GDP figures from across the single currency region are released.

Economists predict that eurozone growth rose to 0.3% in the first quarter of 2019, from 0.2% in October-December. That would be a marginal improvement, but still rather weak.

On a country level, Italy may claw its way out of recession.

New eurozone unemployment figures will also let us see companies are still creating jobs, despite the slowdown.

In a bumper day for data, we should also get growth figures from Mexico and Canada.

On the corporate front, Santander, Lufthansa and Airbus are reporting results this morning, along with BP and Whitbread in the UK, (plus GM, Apple and McDonalds later today).

. Plus, the tech sector could be subdued after Alphabet reported disappointing results.

The markets are expected to be quiet, after another record high on Wall Street last night, but some surprise GDP data today could change that!

The agenda

• 6.30am BST: French GDP for Q1 2019
• 8am BST: Spanish GDP for Q1 2019
• 8.55am BST: German unemployment figures for April
• 10am BST: Eurozone GDP for Q1 2019
• 11am BST: Italian GDP for Q1 2019
• 1.30pm BST: Canadian GDP for February
• 2pm BST: Mexican GDP for Q1 2019