The release of Q1 data for most of the advanced economies revealed something we haven’t observed since the first quarter of 2011 – the Eurozone grew faster than the US (0.2% on a quarterly basis compared with -0.2% for the US).
The devil lies in the details. Our analysis shows that it was Germany which drove growth as its output expanded four times faster than the overall Eurozone rate. In fact, had Germany not grown, Eurozone output would have contracted. Other large economies like France and Italy posted disappointing performance which, as discussed in ourMay Global Economy Watch, could indicate a “softer core” developing in the Eurozone.
Performance in the US was disappointing, but we think that this was partly driven by one-off extreme weather in the Mid-West.We are forecasting that economic activity will rebound in the second quarter and that the US remains on track to grow 2.7% in 2014. UK growth remained robust at 0.8% quarter-on-quarter in Q1 2014, driven primarily by consumer spending but also with an increasing contribution from business investment. More recent business surveys and retail sales data suggest that this momentum has continued into the second quarter, so we have upgraded our UK GDP growth projection further to 3% for 2014 as a whole.