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Only low economic growth expected in the euro area

Summary:
Economic growth in the euro area will be weak this year. After 0.2 percent in the first quarter of 2019, it will only reach 0.3 percent in the following quarters. This is predicted by the three institutes ifo from Munich, KOF from Zurich and Istat from Rome. Industrial production will stagnate in the first quarter of 2019 and then grow twice by 0.2 percent. Nevertheless, the labour market is developing strongly: the number of employees rose by 0.3 percent in the fourth quarter of 2018, and the unemployment rate fell to 7.8 percent, the lowest rate since the end of 2008. At the same time, wages rose significantly. Both developments could support demand from private households in the coming period: According to the institutes' forecast, it will

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Economic growth in the euro area will be weak this year. After 0.2 percent in the first quarter of 2019, it will only reach 0.3 percent in the following quarters. This is predicted by the three institutes ifo from Munich, KOF from Zurich and Istat from Rome.

Industrial production will stagnate in the first quarter of 2019 and then grow twice by 0.2 percent. Nevertheless, the labour market is developing strongly: the number of employees rose by 0.3 percent in the fourth quarter of 2018, and the unemployment rate fell to 7.8 percent, the lowest rate since the end of 2008. At the same time, wages rose significantly. Both developments could support demand from private households in the coming period: According to the institutes' forecast, it will grow by 0.3 percent in the first quarter of 2019 and by 0.4 percent in the coming quarters. Risks for the forecast lie in an expansion of trade conflicts, in a hard Brexit and in the general weakening of the global economy.

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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