Euro-area GDP growth in-line with expectations, but outlook uncertain

Euro-area GDP grew by 0.3% q/q, in line with expectations and unchanged from the previous month. In particular, German economy grew by 0.3% despite very weak manufacturing and export number most recently. Growth in Germany was mainly driven by public consumption and construction investment, which along with private consumption will also be the drivers going forward.

Italy was one weak spot, has almost fallen back to stagnation (GDP up just 0.1% q/q). Growth in France was also weighed down by the terrorist attack in November.

Financial market conditions are important for future growth, and in the current market scenario, it is difficult to quantify how much the turmoil on financial markets will weigh on growth. Moreover a stronger EUR will dampens both exports and inflation.

"The ECB seems determined to ease monetary policy again. Low inflation is one reason, now increased growth risks come on top. Industrial production fell by 1% m/m in December, highlighting the downside risks to growth." said Nordea Bank in a research note