Eurozone: Nowcasts show growth momentum is nowhere to be found

Lacklustre eurozone growth momentum looks unlikely to meaningfully pick up before the end of the year. Our GDP nowcasting models for Q3, which includes a one-off boost from the Paris Olympics, point to modest growth at 0.3% q/q – in line with our baseline

What you will learn:

• Hopes of a swift consumer rebound have not materialised, despite growth in real earnings resuming and a resilient labour market. We previously warned about consumers’ reluctance to spend income gains immediately in the high rates environment – this risk is materialising.
• Industry remains the main weak spot, with little prospect for near-term respite. High interest rates home and abroad are weighing on demand, while high energy costs are still denting competitiveness. We think the sector has further to go before bottoming out.
• Monetary policy normalisation is the key to improved growth, and weak activity favours more front-loaded cuts. However, given transmission lags, this won’t deliver a boost before H2 2025. The main downside risk to our outlook is a sharper labour market deterioration; the main upside risk is stronger consumer propensity to spend income and wealth gains.