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Bonds Are a 'Safe' Investment: A Big Lie Gets Even BiggerEuro-zone GDP increased 0.7% in Q4 2008, 0.2 percentage points above the Bloomberg News survey consensus estimate.
Germany served as the primary economic engine, recording 1.5% in the quarter – its fastest growth in 12 years, Bloomberg News reported Thursday. Meanwhile, France registered 0.6% GDP growth. Together, Germany and France account for about 50% of the euro-zone's GDP.
On a year-over-year basis, euro-zone GDP increased 2.2% in the 15-nation group. Growth in the 27-nation European Union increased 2.4%.
However, despite the upside GDP surprise from both the euro-zone and Germany, key economic officials downplayed the results. European Central Bank President Jean-Claude Trichet told Reuters the news, while positive, simply confirmed what he had expected – that Q1 2008 would be good and the ensuing period slower.
A hint by Trichet?
Economist David H. Wang told BloggingStocks Thursday there could be a glimmer of hope for those who favor an interest rate reduction by the ECB. It was unusual for the ECB's Trichet to reference slower growth after the release of a GDP report, he said. Trichet, an inflation hawk, regularly speaks of Europe's industrial capacity and price pressures in the context of GDP, Wang said.
"I don't know if this was a hint, or perhaps a mini-hint, regarding monetary policy," Wang said. The currency market shrugged-off Trichet's comments, with both the euro and British pound remaining at essentially the same levels they were earlier in the day versus the dollar, at $1.5440 and $1.9445, respectively.
Further, Wang said economists, analysts, and traders/investors may have "a luke-warm response" to the Q1 2008 euro-zone GDP performance. On the one hand, Q1 GDP did exceed expectations, he said. On the other hand, "there are lingering concerns – an expectation, really" that consumer demand will slow in Europe as it has in the United States, with export-sensitive Germany hurt disproportionately.
"Due to the housing overhang, we have this stance on both sides of the Atlantic now that, until we see consecutive quarters of growth, even if you get a good GDP number, people will say, 'Yes, but the next quarter, that's when growth is really going to slow,' " Wang said, with a laugh. "It's not the most balanced of perspectives, nor entirely rational, but it's a typical stance in tougher economic times."
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