As if to rub salt into the wounds of Europe’s death by a thousand-downgrades, Goldman Sachs followed up Germany’s decision to drastically cut its growth outlook for 2014 (+1.2% from +1.8%) and 2015 (+1.3% from +2.0%) by slashing its forecast for Europe in Q3 to a triple-dip recessionary -0.15% GDP growth. This is dramatically below an “over-optimistic” consensus of +0.35% as incoming data is notably weaker than expected. The DAX remains well below the crucial 9,000 level (having plunged early in the European session) and bund yields have collapsed to new record lows.
Germany cuts its own forecast…
- *GERMANY SEES 2014 GDP GROWTH AT 1.2%: SAW 1.8%
- *GERMANY SEES 2015 GDP GROWTH AT 1.3%: SAW 2.0%
Which sent DAX and Bund yields tumbling…
And then Goldman follows up by slashing European growth into a triple-dip recession…
RETINA points to negative real GDP growth in Q3
Bottom line:Â The flash estimate for Euro area GDP growth for Q3 will be released by Eurostat on November 14. In today’s Daily, we present an update of our contemporaneous growth and inflation tracker, RETINA. Since our latest update (September 19), RETINA’s median estimate of activity has moved into negative territory, hovering around -0.15%qoq since end-September. Overall, RETINA continues to see downside risk to our (revised) +0.1%qoq judgemental forecast for Q3 GDP, in line with depressed market sentiment on the outlook for European growth.
RETINA’s latest take on Q3
The RETINA framework provides an econometric methodology that filters incoming information from high frequency indicator variables in order to track the evolution of real economic activity in the Euro area, summarised in the form of a ‘nowcast’ of the next quarterly real GDP growth print.
In a recent European Views (complete with methodological annex), we described the statistical approach that underpins RETINA. In today’s Daily, we focus on RETINA’s implications for Euro area activity (and inflation) in Q3 2014 — particularly the evolution of momentum since our last update on 19 September. There are six key messages:
