Forex Flash: Tracking Eurozone GDP – Goldman Sachs

FXstreet.com (Barcelona) - Last November, we forecast a contraction of 0.1% QoQ in Euro area GDP in the first quarter of 2013. In light of weak incoming survey data, in April we revised down our forecast for Q1 to -0.2% QoQ. However, “our overall view of the outlook for economic activity in the Euro area has remained broadly stable over the past six months: continued contraction of GDP in the coming quarters, with the prospect of stabilization towards the end of the year. The publication of the first quarter Euro area GDP data next week will be an important benchmark against which to test this view.” notes the Economics Research Team at Goldman Sachs.

We analyze the evolution of higher frequency conjunctural indicators through the lens of a modeling framework that characterizes the immediate macro outlook in the form of a conditional forecast for Q1 GDP growth.

This analysis distinguishes three phases: through mid-February, the conjunctural data painted a more optimistic view of the conjunctural situation than our published macro forecast; a significant deterioration in the model-based conjunctural assessment occurred in early March, driven by weaker than expected outturns for the PMI surveys; and updating with the latest conjunctural data leads to a view consistent with our macro forecast, i.e. modest economic contraction.