“Despite a strengthening euro, trade growth was very strong in the second half of 2017 on the back of robust growth in Europe and the rebound in world trade, and has continued at a solid, even if slower, pace in the beginning of 2018. However, in the first quarter of 2018, high frequency indicators and quarterly GDP growth have softened, suggesting that the pace of growth has moderated somewhat from the high levels seen at the end of 2017.” (OECD Euro Area Projections, May 2, 2018)
On a year over year basis, the Euro Zone’s real GDP rose 2.5% in the first quarter of 2018 compared with a 2.8% pace in the previous quarter. The OECD expects roughly 2% or higher growth in 2018 and 2019.
Of course, the Euro Area is comprised of nineteen countries, with rather different economic circumstances. Nonetheless, as the data in following charts illustrate, the Euro labor market is supporting domestic demand growth, which in turn is reducing the average unemployment rate.
Most of the governments in the currency area are also experiencing improving fiscal conditions because of the steady economic growth over the past few years. In fact, the European fiscal stance is slightly expansionary, which helps economic growth and job creation.
The ECB monetary authorities are still firmly committed to accommodation in order to achieve their 2% inflation objective, which is also a positive foreshadowing of the future.
Comments
Log in or sign up to join the conversation.