The euro area LI continues to put in an above consensus call. It is probably over predicting growth somewhat but its strength is fundamentally underpinned by the newly emerged German locomotive. While German demand often turns out to be derived from others, chiefly China, in this case it is genuine. In fact, this is highlighted by our below consensus Australia call. China’s stimulus has not fed through to a rebound in private demand, although easing PPI deflation is helping manufacturers.
Euro area GDP was a tad disappointing in Q2 but, overall, European data remain solid. We expect above-trend growth (1½%) over the next 12 months, although at a marginally slower pace. Spain has been outperforming the rest of the region while Italy remains the laggard, a trend that is likely to continue. To find out more, click above to watch the video or below for the full report.