Weekly Economic Insights - 29 April 2019

Macro Highlights - 5/2/2019

Highlights of the week

Economist insights: Strong US GDP at the start of the year, signs of a pick-up in Chinese growth, Eurozone PMIs do not indicate an improvement, monetary status quo by the BoJ

United States

  • US GDP growth was strong in Q1 2019, at 3.2% y-o-y, after 3.0% in Q4 2018, contrary to consensus expectations
  • We nevertheless continue to expect a gradual slowdown in activity in 2019, to 2.7%, notably due to a deceleration in corporate investment and a higher trade deficit


  • GDP growth stabilised at 6.4% in Q1 2019, while industrial production and retail sales rebounded in March
  • The acceleration in banking credit and the increase in local government bond issues back our scenario of a recovery of investment and a slight acceleration in GDP growth


  • The composite PMI for the Eurozone decreased further in April to 51.3, above all due to a slowdown in the services index from 53.3 in March to 52.5 in April
  • Greater political uncertainty in Spain following the socialist PSOE party’s victory without majority in the general election and the entry into parliament of the nationalist Vox party


  • The central bank (BoJ) opted for the monetary status quo, as we expected…
  • …and put a time frame on its forward guidance, indicating that it would maintain its interest rates at current levels at least until spring 2020

Focus China: What is the future of China’s current growth model?

  • The current investment-led growth model was able to generate strong economic growth up to 2008
  • Since 2008, China's stimulus plans stabilised short-term activity by maintaining investment as the pillar of its growth model
  • However, they had negative economic effects over the long term, thus revealing the limits of the current model and the need to make a transition to an innovation-led growth model


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