A wave of optimism is sweeping the economy, especially in the eurozone, where growth is accelerating and spreading to all member countries. As we enter summer 2017, all economic indicators are looking upbeat, job creations are picking up, and unemployment is declining at a faster pace. The horizon looks bright, with just one exception, China, where a few clouds are forming. Beijing is taking action to curb credit growth again, which is bound to strain activity, notably in the real estate sector. Heavy industry is already showing a few signs of relapsing, and global commodity prices are easing.
Economic growth in the eurozone is estimated at about 2% in 2017, the fastest pace in seven years. The recovery seems to be both well anchored and more widely distributed. It is well anchored because of the support of private domestic demand (household consumption and corporate investment), and better distributed because all countries are participating in the recovery. Germany is no longer the only growth engine. In the first quarter, German GDP growth was in line with the European average (+2.4% at an annualised rate).
Portugal and Spain continued to report remarkable performances with annualised growth rates of nearly 4% and 3%, respectively, while France and Italy chugged along at an annualised rate of 2%. Following the sovereign debt crisis (2011-2012), the Economic and Monetary Union (EMU) has seen very disparate growth rates, but since then this dispersion has tended to narrow (chart 1).
In the light of available economic indicators through the end of spring (PMI surveys, retail sales, consumer confidence, etc.), there is little room to doubt that the recovery will continue in the short term. Hiring intentions are still firm, particularly in the construction sector. The eurozone’s dynamic job market (2.3 million job creations in the past year) has little to envy the trends observed in the United States.
To read the entire report Please click on the pdf File Below:
by Jean-Luc PROUTAT