Bert Colijn, Senior Economist at ING, suggests that the weakest export growth of Eurozone since 2011 and sluggish investment indicate Brexit impact and provide further argument for the ECB to extend as political uncertainty is likely to remain significant in 2017.
“Investment growth dropped to 0.2% QoQ in Q3, which was the weakest growth in more than a year. Exports grew at just 0.1% QoQ - the weakest pace since 4Q11 - resulting in a negative contribution from net exports to GDP growth. This provides evidence for the view that Brexit did have an immediate impact on the Eurozone economy as businesses held off investment decisions given the political uncertainty and the uncertainty about trade rules with the UK.”
“Post-Brexit vote economic activity has not come to a halt as consumption growth accelerated, albeit moderately. Households increased consumption just slightly - from 0.2% QoQ to 0.3% QoQ - in an environment of slowing employment gains and higher oil prices. Now that the employment outlook and consumer confidence have improved again, Q4 could be set for further acceleration in domestic demand but with increasing inflation on the back of higher oil prices upside seems limited for the moment.”
“For the ECB, this breakdown of growth by components shows that political risk is indeed to be taken seriously as investment and exports have been impacted by the Brexit shock. Moving ahead, that will provide further argument for an untapered extension of the QE program as political uncertainty is likely to remain strong in 2017. We expect the ECB to announce an extension of three to six months on Thursday.”
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