· GDP: after stagnant GDP in 4Q09 and weather related weakness in 1Q (construction, transport), a significant rebound can be expected in 2Q, followed by return to 1.25% annualised trend growth thereafter.
· Consumer spending: household consumption is depressed by weak income growth and the expiry of fiscal support in the first half of 2010. Brightening sentiment might imply a slight drawdown in savings, helping consumption grow in line with GDP.
· Capital spending: investment is likely to remain fitful, even after a weather related boost in 2Q10
· Net exports: a weakening euro and slow consumption is likely to lead to a modestly positive contribution from net exports to GDP.
· Inflation had received a boost by a surge in petrol prices, but abating cost pressures keep inflation tame this year. Some demand-related pick-up may be in the offing in 2011.
· Compared with the ECB/ESCB Staff's March central projections, our GDP growth forecast is slightly higher for 2010 and slightly lower for 2011, while we forecast inflation to be lower than the ECB expects both this year and next.
· Countries: Germany is in the best position to take a lead on growth, given its health in the financial balances of both its public sector and its private sector.
© Eurozone Advisors Ltd
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