China’s stabilizing economy should “boost euro area growth notably” this year even if on a smaller and slower scale than a previous lift in 2016, according to Goldman Sachs Group Inc.
There’s typically a three-month lag before Chinese growth impacts the euro area and spillovers -- which have been strongest in Germany and weakest in Spain -- are most noticeable in industrial indicators including orders and production.
In 2016, European growth picked up mid-year after China accelerated during the first quarter, Goldman economists led by Jari Stehn wrote in a note.
"Compared with 2016, China’s stimulus since third quarter 2018 is smaller in size and different in composition, with more focus on boosting infrastructure spending via fiscal policy than broader industrial activity via credit policy," the Goldman economists wrote. "Chinese infrastructure spending tends to have somewhat weaker and more protracted -- but nonetheless significant -- spillovers into Europe."
While the euro area will remain sluggish through the second quarter, growth will accelerate to 1.5 percent in the second half of the year, Goldman predicts.
Source: Bloomberg
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