Northern Europe exhibited a strong start of 2011 with quarter-on-quarter economic growth ranging from 0,9% (Netherlands) to 1,5% (Germany).

The mild weather literally catered for a climate conducive to investment in the Netherlands and Germany. The outlook is much more moderate, though.

The impetus to investment is probably one-off, whilst –apart from Belgium– consumers have not definitely picked up the baton. Sovereign debt concerns and austerity weigh on willingness-to-buy.

Germany – Otto Normalverbraucher still cautious
Germany's economic growth momentum continues to surprise on the upside. But the pace of growth will return to more sustainable levels going forward. Sadly, despite the healthy development in labour market conditions (the unemployment rate reached 7% in May, the lowest level since reunification), consumers are becoming more pessimistic. This is partly explained by higher inflation and the ongoing crisis in the eurozone periphery. 

Belgium – Economy remains on track even without government
In spite of the political deadlock, the Belgian economy seems to keep up with the growth pace witnessed in 2010. Especially, we see ample space for domestic demand to contribute further to GDP growth. Helped by postponed austerity measures and high wage growth, private consumption growth is expected to remain on track this year. Besides that, we expect private investment to contribute positively to growth.

Italy – Terribly tardy recovery
The Italian economy has started 2011 as weak as it ended 2010. The economic recovery is clearly lagging that in the northern part of the eurozone. Italian exports are hit relatively hard by the financial and economic problems in the other Southern European countries. Private consumption has staged a relatively robust recovery, but given further pressure on incomes is likely to grow only slowly going forward.

The Netherlands – Strong first quarter growth
First quarter real economic growth was surprisingly high at 0.9% (q-o-q). Driving force behind the growth figure was higher private investment in housing and commercial real estate. Mild weather conditions in the first quarter allowed for more construction than in the months before. Looking ahead, the pace of real GDP growth is expected to be more moderate in the rest of the year, as the growth of private investment volume settles down while real consumption growth remains weak.

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