Corporate surveys in November show that the pace of growth is still accelerating in the Euro Area. This can be seen at the global level but also in every sector, notably in the manufacturing sector where the stronger momentum is consistent with a higher international trade dynamics. Surveys also show that employment is increasing rapidly and that nominal pressures remain limited.
Synthetic indices on economic activity stabilized in August according to the Markit Survey that was out this morning. These figures are consistent with a 0.5/0.6% GDP growth for the third quarter (non annualized figures).
The employment momentum is still robust but doesn’t accelerate anymore. But the business cycle is still virtuous with a strong momentum in the manufacturing sector. The survey price index stabilized in August. The ECB can maintain its accommodative bias on its monetary policy. The more expansive euro has not yet influenced companies’ behavior.
Strong growth during the second quarter
GDP growth was marginally stronger during the second quarter in the Euro Area. It was at 0.56% (2.26% at annual rate) after 0.51% (2.04% AR) during the first three months of this year. The growth profile has been slightly modified with this publication. Formerly, GDP growth for the first quarter was at 0.58%.
Carry over growth for 2017 at the end of the second quarter is 1.7%, close to 2016 average growth. We see on the graph that during the last three quarters growth is stable and close to 2% (at annual rate).
When we look at corporates’ surveys (see below), we can infer that GDP growth could be close to 0.5% (2% at annual rate) during the last two quarters of 2017. In that case the average growth for 2017 could be at 2.1%. Continue reading
French economic growth is set to step up a pace in 2017 and 2018. It will benefit from a more buoyant world context, which has been visible in the surge in world trade over recent months. It will also be driven by activity in the euro area, which is enjoying a situation that we have not seen for some time. Business trends are picking up across all countries in the zone, even Italy, and business leaders are now much more optimistic than they were a few months ago.
The situation in the Eurozone is also characterized by fiscal policy that has become neutral, and monetary policy that is set to remain accommodative for a while to come. This means that for such times as inflation stays well below the ECB’s 2% target, the central bank will not change its monetary approach. To add to this, oil prices are not expected to rise sharply, so long-term rates will still stay very low. This overall context promotes risk-taking and encourages investment.