Heating Up: US Economic Growth Sizzles In Strong First Quarter

Switching to Europe, Ristuben said that first-quarter corporate earnings for STOXX® Europe 600 companies have been very strong. “So far, with a little less than half of all companies reporting, roughly 75% of STOXX 600 companies are beating growth expectations, marking a dramatic recovery from a year ago,” he remarked.

The strong corporate earnings are at odds with the region’s first-quarter GDP, which contracted by 0.6% on a quarter-over-quarter basis due to the reimposition of lockdowns. However, Ristuben noted that the eurozone economy gained momentum near the end of the first quarter, as evidenced by a blowout manufacturing PMI (purchasing managers’ index) reading of 62.5 in March. A number above 50 indicates expansionary conditions, and a number below 50 indicates contractionary conditions.

Much of Europe is an export-based economy, he said, meaning that when large economies such as the U.S. experience strong growth, European manufacturing generally benefits. “These strong manufacturing numbers may take a while to flow through into GDP numbers, which explains some of the discrepancy between the recent GDP report and corporate earnings,” Ristuben noted. Overall, European corporate earnings are tracking in a very similar fashion to the U.S., and are simply outstanding, he concluded.

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