Eurozone Economic Forecast

Eurozone Economic Outlook

November 20, 2018

The Eurozone economy lost momentum in the third quarter, with GDP growth recording the worst result in over four years. Although a breakdown by components has not been released yet, sluggish private consumption as higher oil prices dented households’ purchasing power and weak industrial activity, partly due to one-off factors which held back automobile production, likely drove the result. While the economy is expected to bounce back somewhat in the fourth quarter, the economy has clearly entered a lower cruising speed this year. Available data for Q4 suggests that activity remained downbeat, with economic sentiment and the composite PMI both sliding in October. The political arena, meanwhile, remained turbulent. In November, the populist Italian government mostly stuck to its guns over its expansionary 2019 budget, defying calls by the European Commission to rein in spending and setting the stage for a protracted conflict with the institution. Moreover, although EU leaders and UK Prime Minister Theresa May finally struck a deal on the UK’s withdrawal from the European Union, political turmoil in the UK is casting a shadow over whether the agreement will receive the greenlight in parliament.

Eurozone Economic Growth

A tightening labor market and solid investment should buttress activity next year. However, less accommodative monetary policy and slower global trade will cause growth to slow, while rising global protectionism and turbulent internal politics remain the key risks to the bloc’s forecasts. Met the why particular panelists downgraded their view of the Eurozone economy this month, taking into account the recent downbeat data and stark external backdrop. The panel now projects growth of 1.7% in 2019, which is down 0.1 percentage points from last month’s forecast, and 1.6% in 2020.

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Eurozone Facts

Exchange Rate1.130.65 %Dec 14
Stock Market1,069-0.52 %Dec 14

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