The week was marked by the releases of first growth estimates for the second quarter. Eurozone growth slowed, with GDP up only 0.3%.
Spain remains among the front-runner (+0.7%) but France was stagnant after a robust Q1 (+0.7%). It is crucial to keep in perspective the slump in consumer spending, since the decline observed between April and June was mainly due to automobiles and energy, suggesting another rebound in Q3 is far from impossible.
Growth was much more dynamic in the UK (+0.6% in Q2 after +0.4% in Q1), but this divergence is bound to be reversed soon. It is the UK and not the EU-27 that will have to pay the heavy price of Brexit, possibly as early as Q3 based on the drop-off in UK confidence indicators. In the United States, growth accelerated, but not as buoyantly as we had hoped: +1.2% (quarterly annualised rate) after +0.8% in Q1.
In the first half of 2016 as a whole, the eurozone grew faster than the US (0.3% versus 0.5%). Given the differences in growth potential, the Old World was even more buoyant in early 2016, and managed to reduce the output gap, whereas it only levelled off in the New World.
What about Asia? Japan’s national accounts will not be released until August 15th, but the Bank of Japan decided not to wait. Although it changed neither its key rates nor JGBs’ purchases, it has virtually doubled its purchases of ETFs, which could reflect the BoJ’s determination to limit the yen’s appreciation.