Euro Growth Indicator

Euro Growth Indicator August 2017



Quarter 2015 :04 2016 :01 2016 :02 2016 :03 2016 :04 2017 :01 2017 :02 2017:03
Euro Growth Indicator 2.2 1.5 1.9 1.7 2.0 2.1 2.2 2.3
Eurostat 1.9 1.7 1.7 1.7 1.9 1.9 2.1  



uro area growth expected to remain on track in the third quarter

by Catherine Mathieu

OFCE Paris

on August 6th, 2017

The first estimate released by EUROSTAT on 1st August showed euro area GDP having grown by 0.6% in the second quarter of 2017. This is slightly below the estimates produced by the Euro Growth indicator for the second quarter (0.7%), although both estimates signal that GDP growth remained solid in the second quarter. According to the Euro Growth indicator’s latest estimate, euro area growth will slightly decelerate in the third quarter, while remaining close to 0.6%.

The slight deceleration of euro area GDP growth will be mainly due to a less buoyant industrial sentiment. The appreciation of the euro-dollar exchange rate since the beginning of the year (playing with a two-quarter lag in the indicator) would also start to bite and reduce marginally GDP, as would a slight degradation of the consumer sentiment. These negative contributions to GDP growth would be partly offset by an improvement from the construction sector side.

All in all, the Euro Growth Indicator suggests that the recovery in the euro area economy will remain on track this summer, at least as depicted by survey data. On a year-over-year basis this would translate into growth of close to 2.3 percent in the third quarter, up from 2.1 percent for the second quarter according to the latest Eurostat estimate.

Disclaimer: With EUROSTAT having shortened its publication delays for the preliminary flash estimates, the Euro Growth indicator calculated by EUROFRAME provides a one-quarter ahead forecast only.



Indicator methodology

The Euro Growth indicator forecasts the euro area GDP quarterly growth rate two quarters ahead of official statistics using a bridge regression. Regressors are chosen among survey data and financial data, i.e. series which are rapidly available and not revised. The monthly series are converted to a quarterly basis by averaging their monthly values. Series selection is conducted on an econometric basis starting from the set of monthly business and consumer survey results released by the European Commission: industry, construction, retail trade, services and consumers. From this large dataset, a few series are significant stemming from industry (production trend and expectation), construction (confidence indicator) and households surveys (major purchases). Two financial series are also significant, i.e. the growth rates of the real euro/dollar exchange rate and of a Euro area stock market index.

Some of these regressors are leading by at least two quarters, and may be used as such to forecast GDP growth. Some others are not leading or are leading with a lead which does not suit a two-quarter-ahead forecast horizon. These series have to be forecast, but over a short time-horizon which never exceeds four months. All these forecasts are implemented using monthly autoregressive equations.

The Euro Growth indicator is run each month, soon after the release of business and consumer survey results.


For any further information, please contact Hervé Péléraux
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