Real GDP in the Eurozone grew by +0.2% q/q in Q4. For 2018 as a whole GDP growth came in at +1.8%, above the potential rate for the fourth consecutive year. We expect the slowdown from +2.5% in 2017 to have been broad-based. Consumer spending growth should have slowed to +1.3% or so in 2018 – the slowest pace since 2014. And uncertainty related to the US-China trade dispute has started to weigh more notably on Eurozone exports which we estimate to have grown by +2.7% in real terms in 2018, about half of the pace registered in 2017. The weakness of consumer and external demand in addition to the crisis in the automotive sector in some countries, notably in Germany, are likely to have held back corporate investment. Our concerns about Italy slipping into recession have been confirmed with GDP contracting for the second quarter in a row (-0.2% q/q in Q4) as elevated uncertainty around Italy’s fiscal policy is likely to have taken its toll on domestic demand. Meanwhile, Spain defied again its peers and grew +0.7% q/q, with a rebound of net exports and still solid domestic demand.
