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ifo Economic Climate in the Euro Area Improves Significantly

Summary:
Advance results of the Ifo World Economic Survey (WES) of 2nd quarter 2017 Press Release (PDF, 184 KB) The ifo Economic Climate Area in the euro area improved markedly in the second quarter. The indicator rose from 17.2 balance points to 26.4 points, reaching its highest level since the onset of the global financial crisis in the late summer of 2007. Assessments of the current economic situation in particular were more favourable than last quarter. The six-month economic outlook also improved and economic growth looks set to accelerate noticeably in the first half of 2017. Among the euro area’s large economies, the best economic climate currently prevails in The Netherlands, Germany, Austria and Belgium. Compared to last quarter, improvements were particularly marked in Spain, The Netherlands, Belgium, Austria and Finland. In France and Italy, by contrast, there are still no signs of a sustainable recovery. Experts upwardly revised their inflation expectations for this year from 1.6 percent, versus 1.3 percent last quarter. A growing majority of experts accordingly expects an increase in short and long-term interest rates over the next six months.

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Advance results of the Ifo World Economic Survey (WES) of 2nd quarter 2017

The ifo Economic Climate Area in the euro area improved markedly in the second quarter. The indicator rose from 17.2 balance points to 26.4 points, reaching its highest level since the onset of the global financial crisis in the late summer of 2007. Assessments of the current economic situation in particular were more favourable than last quarter. The six-month economic outlook also improved and economic growth looks set to accelerate noticeably in the first half of 2017.

Among the euro area’s large economies, the best economic climate currently prevails in The Netherlands, Germany, Austria and Belgium. Compared to last quarter, improvements were particularly marked in Spain, The Netherlands, Belgium, Austria and Finland. In France and Italy, by contrast, there are still no signs of a sustainable recovery.

Experts upwardly revised their inflation expectations for this year from 1.6 percent, versus 1.3 percent last quarter. A growing majority of experts accordingly expects an increase in short and long-term interest rates over the next six months. Over half of survey participants agreed that the major economic problems are currently rising income inequality, a shortfall of innovative ideas and a lack of confidence in economic policy. Only a few experts cited export restrictions and the poor credibility of the European Central Bank’s monetary policy as problems.

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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