Accelerated growth in the EMU – forecast revised upwards

In Q2 2017, according to initial estimates economic growth in Euroland came to +0.6 percent on the prior quarter. In other words, the pace has picked up again, albeit slightly, and the Eurozone economy is increasingly gaining momentum. What is also emerging is that the growth is spread across many shoulders.

The trend among the larger member states that have already released their flash estimates is positive. Spain and Austria lead the way hitherto, both reporting quarterly growth of +0.9 percent. And the French economy has also posted robust growth of +0.5 percent. Things were slightly slower in Belgium, where the rate was +0.4 percent.

The leading indicators had already pointed to the EMU achieving a strong result. The sentiment among European purchasing managers remained lodged at a high level in the second quarter, with the index actually being higher than at any point since 2011. Despite a slight dip in July, the sentiment index continues to signal strong growth.

The rosy economic prospects are also borne out by the DZ BANK Euro Indicator we compute. In June, the indicator, which signals economic turning points in advance, had climbed to its highest level since 2007 and held steady there in July. Despite slight losses as regards consumer confidence, consumers remain very upbeat as regards both the general economic trend and their personal income in the coming 12 months. In other words, the willingness to make larger purchases has now risen to the highest point since 2000 – a favourable sign for the further course of private consumer spending.

In this context, we forecast a growth rate of 2.0 percent for the EMU economy for the current year, although the momentum in the second two quarters is likely to be slightly below that seen in the first half.

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