Goldman Sachs says China's stabilising economy will be able to give the euro area a bit of a boost in the coming months
The firm's economists wrote in a note that China's stabilising economy should boost Eurozone growth 'notably' this year even if on a smaller scale than a previous lift seen in 2016. Adding that there's typically a three-month lag before Chinese growth impacts the euro area and spillovers - Germany being the greatest influenced as the effects are more noticeable in industrial indicators including orders and production.
The note basically just compares the pick up in growth in the Eurozone during 2016 mid-year after China's economy accelerated during the first quarter of that year. Hence, they're arguing that although the stimulus measures employed by China this time around are different, it is still nonetheless significant and will have spillovers into Europe.
They project that growth in the Eurozone will still remain sluggish through Q2 2019 but will accelerate to 1.5% in 2H 2019.
There's no doubt that China's stabilisation in the first quarter of this year has been a decent bright spot for the global economy. However, it's a bit premature to say that such circumstances will prevail throughout the year. Chinese authorities have basically thrown in a handful of measures just to get things barely on track again and you have to wonder whether or not it will have a lasting effect to shore up economic confidence.
