The latest positive surprises in euro area figures imply that we lift our already above consensus GDP growth forecast from 1.5% to 1.6% in 2015 and from 2.0% to 2.1% in 2016 (consensus 1.2% and 1.6%, respectively).
We expect GDP growth to gain momentum in 2015 as it is supported by several factors. The main factors behind higher growth are 1) the lower oil price, supporting private consumption which is already decent, 2) the weaker effective euro, which benefits exporters, 3) cheaper and more accessible bank lending, 4) fading uncertainty, which supports investments, and finally 5) less fiscal headwind.
The stronger activity should mainly be driven by higher private consumption. Retail sales were up 0.7% 3m/3m in January, which is the highest rate of increase since 2000. The strong growth is due to the low oil price, the declining unemployment rate and higher consumer confidence.
Our new forecasts also reflect that investments started to increase in Q4 last year. The fading uncertainty seen in the improved business sentiment and the continued demand from private consumption should imply that investment will continue to increase gradually in H1 15 before gaining more momentum in H2.
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