Q1 should mark the trough in the growth cycle

April’s business surveys provided some tentative signs that the euro-zone economy may start to contract at a less rapid pace in Q2. But any improvement will be from a very low base. Indeed, the latest news suggests that the economy may have contracted by as much as 2.5% in Q1. This has led us to revise down our annual GDP forecast for this year from -4.0% to -5.0%. But the good news is that the sharpest quarterly falls in GDP should now be over.