Country Economic Forecasts > Eurozone

The 0.6% quarterly rise in Eurozone GDP in Q1 was the strongest in a year, outperforming both the US and the UK in the same period. Although Q1 growth was stronger than the consensus expectation, it was in line with our GDP indicator estimate. A breakdown is not yet available, but the signs are that household spending and domestic demand remained strong.But the Q1 outturn is likely to have overstated the underlying pace of growth. The business surveys such as the composite PMI are consistent with the solid but unspectacular growth rates recorded in H2 last year. And the healthy rise in industrial production appears at odds with the ongoing weakness in the external sector. Meanwhile, construction may have benefited from a weather-related boost. So we expect GDP growth to slow in Q2. That said, the 0.4% rise we have pencilled in still suggests some improvement in the underlying pace of growth in the first half of this year.Overall, we have left our GDP forecast for this year unchanged at a slightly above-consensus 1.6%, and we anticipate a modest acceleration to 1.7% in 2017. The expected slight pick-up in growth, together with a rise in CPI inflation to 1.4% next year, should mean that that the ECB unveils no further major policy support measures.