KfW Business Cycle Compass Eurozone June 2019

In the first quarter of this year the euro area economy grew 0.4%, twice the rate of the preceding quarter. The joy over this is likely to be short-lived, however. Adverse international conditions are weighing on the industrial sectors and the renewed escalation of trade tensions is hampering the trend reversal.

We therefore expect the growth rate to level off again in the current quarter and maintain our GDP forecast unchanged at 1.1% for 2019 and 1.5% for 2020.

The downward risks to the business cycle are substantial and have risen again lately. The likelihood of a hard Brexit, new turmoil surrounding Italy’s public finances, rising protectionism and sanctions is growing. This is fuelling concerns that the weakness, which has so far been restricted to the manufacturing sector, will spill over into the labour market and the aggregate economy.

KfW Business Cycle Compass Eurozone June 2019(PDF, 181 KB, non-accessible)