Cautious ECB ahead of Jackson Hole. We do not expect a surprise

Eurozone GDP growth reached 0.6% QoQ last quarter, with solid contributions from the Netherlands, Germany and France.

Positively, Italian activity picked up slightly (+0.4% QoQ). We note that German GDP growth was revised up in Q1 (by 0.1 point), while second quarter growth reached 0.6% QoQ.

By expenditure, positive contributions came from private consumption, government spending and fixed asset investment in construction, machinery and equipment. However, we also note a deceleration in net trade due to imports outgrowing exports. This latter development is likely to continue given the recent euro appreciation in reaction to declining political uncertainty and lower expectations of higher interest rates in the United States.

On the ECB, the forthcoming speech by M. Draghi at Jackson Hole will deal with global economic dynamics but not with monetary policy per se. This makes a surprise policy announcement unlikely. In our view, the ECB will remain cautious in order to control a potential misalignment between real data and communication that could lead to further volatility in financial markets, especially in foreign exchange.

Gero Jung – Chief Economist – Mirabaud AM