Eurozone: Expansion is becoming increasingly self-sustaining – Wells Fargo

Eurozone GDP expanded 0.6 percent in Q1 (2.3 percent annualized) and is up 1.9 percent from a year ago, marking the  ninth consecutive quarter in which the year-over-year growth rate has fallen in the range of 1.5 percent to 2.0 percent, notes the analysis team at Wells Fargo.

Key Quotes

“Growth in Q1 was broad-based, with household spending rising 0.3 percent and business investment growing 1.3 percent. Government spending growth was also positive, expanding 0.4 percent in Q1.”

“Sentiment indicators in the Eurozone are quite strong at present. The manufacturing PMI in the euro area rose to a multi-year high in May, and the Ifo index of German business sentiment stands at its highest level since reunification. That said, the actual state of the Eurozone economy does not appear to be as strong at present as the sentiment indicators would suggest. However, the expansion is becoming increasingly self-sustaining.”

“The European Central Bank (ECB) held a widely anticipated policy meeting in early June. As expected, the Governing Council decided to keep its three main policy rates unchanged at the levels that have been maintained for more than a year. Furthermore, the Governing Council did not make any changes to its pace of bond buying, which currently totals €60 billion per month. There was some speculation that the ECB may signal a further tapering in its quantitative easing (QE) program, but the Governing Council continued to say that it would buy €60 billion per month through the end of the year.”