ECB At A (Familiar) Crossroads

If Brazilian central bankers are the standard for illicit shamelessness, their European counterparts are at least on the same spectrum. At the end of April, the European Central Bank’s President Mario Draghi took his shot at purposeful mischaracterization. Speaking to the press after the ECB’s Governing Council meeting had concluded, Draghi had been forced to concede there had been at the time, “a loss of momentum that is pretty broad-based across countries and all sectors”.

Eurostat would show that the size of the slowdown was pretty sizable. Real GDP growth in Q1 was cut in half from the prior few quarters ending 2017. That was OK, according to Draghi, because last year growth was, in his view, beyond excellent.

He would brazenly say as much three months later, even though the “moderating” economy had stubbornly persisted. Speaking to the press at the end of July following that Governing Council session, the ECB head, pardon me, spun his ass off:

Quarterly real GDP growth moderated to 0.4% in the first quarter of 2018, following growth of 0.7% in the previous three quarters. This easing reflects a pull-back from the very high levels of growth in 2017 and is related mainly to weaker impetus from previously very strong external trade, compounded by an increase in uncertainty and some temporary and supply-side factors at both the domestic and the global level. [emphasis added]

Playing to his home crowd, he knew the narrative about last year’s economic “boom” would go unquestioned. Therefore, if you think 2017 was some shade of awesome then a little slowdown this year really shouldn’t be something to get worked up about.

If, on the contrary, you see how last year was at best minimal, then cutting growth in half starting from lackluster is a different animal. Eurostat reported that the slowdown had indeed carried on into Q2, with growth a touch less than even Q1.