Q1 15 euro-area GDP breakdown to show a consumption-led recovery

The second estimate of euro-area GDP is expected to confirm the first estimate of 0.4% qoq and 1.0% yoy. Consumption rose 0.4% qoq in Q1 15. In terms of GDP components, the 2015 cyclical recovery is mainly being driven by consumption, explaining 80% of GDP growth over the past year, forecasts Societe Generale. The main factor behind this has been faster growth in real gross disposable income (1.7% yoy in Q1 15), attributable to the recovery in employment (2.6% yoy in Q1 15) and low inflation.

Turning to investment,  an increase of 0.5% qoq is expected, says Societe Generale. As with consumption, investment continues to be supported by the positives already mentioned. The large output gaps and stilllow corporate profit margins suggest that the recovery in investment will mainly concern the replacement of obsolete capacity. Our view is that businesses still need to be convinced that these factors can materialise into sustainable and structural growth.

"Meanwhile government expenditure should increase by 0.4% qoq, mainly driven by the reduction in the pace of austerity. Finally, net exports are likely to have a negative contribution to growth in Q1 as global demand remained lacklustre, with particular weakness in China and the US", according to Societe Generale.