ECB’s growth forecast of 1.7% for the euro zone too optimistic

Data released earlier today showed that German GDP in Q4 expanded by 0.3% q/q as expected (consensus : 0.3%). Details showed that strong government and private consumption was obviously neutralised by declining external demand and the trend is expected to continue in the coming quarters.

 Most economists forecast a high growth rate of 1.8% for 2016 as a whole. But this can only be realised if growth accelerates in Q1 and Q2.  Despite booming domestic demand, the decline in leading indicators and the recent market turmoil argue against economic growth increasing in the coming quarters as most economists hope.

"We feel comfortable with our 2016 growth forecast of 1.3%, which is well below the consensus. The ECB will probably ease monetary policy further in March and in case of doubt do more than we had previously expected." said Commerzbank in a report.