German Q1 GDP Confirmed in Final Reading; Breakdown Reveals Mild Weaknesses
The final reading for German Q1 GDP confirmed the preliminary results at 1.5% quarter-on-quarter while annual rates were also left untouched at 5.2% (n.s.a) and 4.9% (w.d.a). The breakdown was released with the final reading, as usual, and shows few surprises but did show a shade of weakness still in the economy. On the investment side things were as one would expect in a low interest rate environment as capital investment surged 5.0% in Q1, after a modest contraction in Q4 2010, and construction investment rose 6.2% after a revised -2.6% in Q4 2010 (was -3.9%).
Despite on going improvements in Germany’s labour market private consumption continued to lag behind forecasts easing to 0.4% from 0.6% (revised up from 0.2%) in Q4 2010 and missing expectations of 0.5%. This coupled with yesterday's much weaker than expected flash May PMIs (was weakest since Sept. 2010) has us questioning if the Euro-zone's beacon of strength has peaked. Growth is certainly expected to continue healthily in coming quarters but it may start to ease back from the robust numbers we are accustomed to.
The euro erased a portion of its morning gains after the mild weakness in the German economy inspired some to take profits on the over-night rebound. Trade this morning remains in consolidation territory as the euro licks its wounds after yesterday’s violent sell-off amid resurgent fears about Italy, Greece and Spanish solvency. Consolidation could certainly continue for a number of session but once Eur/Usd breaks through the 100-day SMA at 1.3975 then a further downside extension looks likely.
Written by Jonathan Granby, DailyFX Research Team
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.