Euro area: risks from slower growth in the US and China

We forecast a moderation in growth in the US and China for this year. Latest data out of both countries, h owever, were mixed , suggesting that the slowdown could be , at least temporarily, more pronounced than we envision. We find that a 1% decline of US and Chinese growth would , all else equal, take away around 0. 2 % of euro area growth after 1 year . While this looks manageable, it would hit the euro area at a point where growth has already grinded close to a halt. Thus, a clear further deterioration in US and/or Chinese growth could be the “straw that breaks the camel’s neck”, pushing the euro area into recession.