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Eurozone Economic Outlook: Solid growth prospects

Summary:
Apr 6, 2017 Business indicators of the euro area have been positively oriented in the last months, suggesting a continuation of the recovery process. In Q1 2017 the Eurozone economy is expected to grow at a similar pace as registered at the end of 2016 (+0.4%), then slightly faster in Q2 (+0.5%) before returning to +0.4% in Q3 2017. The main force behind the expansion in aggregate activity should be private consumption which benefits from the increase in disposable income and favourable labour market conditions and despite the upturn in inflation which is eroding household purchasing power. Moreover investment is forecast to strengthen, driven by improved expectations about near term outlook. Also investment in construction should accelerate. Finally, the positive international environment will likely reinforce external demand growth and exports.

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Apr 6, 2017

Business indicators of the euro area have been positively oriented in the last months, suggesting a continuation of the recovery process. In Q1 2017 the Eurozone economy is expected to grow at a similar pace as registered at the end of 2016 (+0.4%), then slightly faster in Q2 (+0.5%) before returning to +0.4% in Q3 2017.

The main force behind the expansion in aggregate activity should be private consumption which benefits from the increase in disposable income and favourable labour market conditions and despite the upturn in inflation which is eroding household purchasing power. Moreover investment is forecast to strengthen, driven by improved expectations about near term outlook. Also investment in construction should accelerate. Finally, the positive international environment will likely reinforce external demand growth and exports.

Clemens Fuest
Clemens Fuest took over from Hans Werner Sinn as chairman of the IFO Institute in April 2016. He is professor at the Faculty of Economics of the University of Munich.

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