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IHS Markit European GDP Nowcasts Update 5th August 2019: Downward revisions across euro area

In July 2019 we introduced two nowcasting models for the eurozone and the UK. The models utilise a range of data widely used to track economic developments and provide timely estimations of quarterly GDP growth.

As the datasets include information provided from business surveys, official statistics offices and the financial markets, there is a steady flow of new data available to us during a quarterly nowcasting cycle. With our model frameworks comfortably able to incorporate this new information in a statistically efficient manner, this calls for regular, real-time, nowcast updates which we present in this new report.

Alongside the nowcasts for the eurozone and the UK, we have also been able to extend our coverage to include updates for France, Germany and Italy.

Summary: 5th August 2019

Following disappointing flash PMI data across the euro area, confirmed by today's final PMI figures, other business indicators released over the past week or so have tended to confirm a challenging economic environment within the euro area.

This has led to a slight downgrading of third quarter eurozone growth to just +0.09% q/q (previous: +0.13% q/q). Germany, where manufacturing sector weakness is most apparent and where tentative signs of overspill into the domestic market are appearing, also sees a reduction in its nowcast to -0.14%. Whilst our reading of euro area Q2 GDP figures suggests that Germany may have narrowly avoided a contraction in the three months to June, the underlying growth trajectory of the region's largest economy undoubtedly remains soft.

Meanwhile, official Q2 GDP figures showed France growing at a slightly slower-than-expected rate (+0.24%, versus projected +0.30%). This slight loss of momentum from Q2 in our model subsequently pulls down the Q3 nowcast lower to +0.32% (previous +0.36%).

In contrast to France and Germany, Italy's projection is upwardly revised, though at -0.04%, the latest estimate points to an Italian economy stagnating at best following confirmation of a similar outturn for Q2.

Finally, over in the UK, slightly better than projected construction and services PMIs helps to nudge up the Q3 nowcast. But with manufacturing remaining a notable drag, a forecasted Q3 outturn of +0.1% q/q continues to point to an underperforming economy heading into year end.

Joe Hayes, Economist, IHS Markit
Tel: +44 1491 461006

Paul Smith, Director, IHS Markit
Tel: +44 1491 461038

© 2019, IHS Markit Inc. All rights reserved. Reproduction in whole or in part without permission is prohibited.

Purchasing Managers' Index™ (PMI™) data are compiled by IHS Markit for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.

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