Economic growth in the Eurozone is solid and will strengthen further in the coming months. The job market continues to improve. However, underlying inflation dynamics are still weak and a high level of monetary stimulus remains needed in the currency area. This is, in summary, the content of the latest ECB bulletin on the conditions of Euroland.
“While the Governing Council's belief that inflation will evolve towards its target strengthens, overall domestic price pressures have remained subdued and have yet to show convincing signs of a sustained upward trend. , an ample degree of monetary stimulus is still needed for underlying inflationary pressures to continue to build up and support headline inflation dynamics over the medium term.
Based on this analysis, the Governing Council decided in thelast meeting on 14 December to leave key interest rates unchanged “and continues to expect them to remain at current levels for an extended period of time, well beyond the horizon of the net asset purchases”.
STRONG AND GENERALIZED GROWTH
The economic analysis, "carried out on the basis of the most recent economic data and the results of qualitative surveys, indicates strong and generalized growth at the turn of the year - continues the ECB - The strong economic momentum the continuing reduction in the underutilization of resources and the growing degree of capacity utilization further strengthen the Governing Council's confidence that price developments will converge towards the objective of an inflation rate below, but close to, 2 per cent. On the one hand, the strong cyclical momentum could give rise to further positive developments for growth in the coming quarter. On the other hand, the downside risks remain mainly attributable to factors of a global nature and to trends in the currency markets”. In fact, while the climate of confidence improves, "the recent volatility of the exchange rate represents a source of uncertainty to be kept under observation due to its possible implications on the medium-term prospects of price stability". However, the euro-dollar exchange rate fell from 1,25 in December to the current value of 1,23.
“Private consumption – continues the bulletin – is driven by the growth of employment, which in turn benefits from past labor market reforms and the increase in household wealth”. Furthermore, the strengthening of business investments continues, "supported by very favorable financing conditions", by the growth of corporate profitability and by strong demand. Housing investment has seen an improvement in recent quarters. Furthermore, the broad-based global expansion is providing a further stimulus to euro area exports.
EUROZONE LABOR MARKETS CONTINUE TO IMPROVE
According to the Frankfurt institute, the euro area labor markets continue to improve, thus supporting household income and consumer spending: "In the third quarter of 2017, employment underwent a further increase of 0,4, 1,7 per cent compared to the previous period, bringing the annual increase to XNUMX per cent”.
Employment is currently around 1,2% above the pre-crisis highs of the first quarter of 2008. In November 2017 the unemployment rate in the euro area stood at 8,7%, down from 8,8 per cent in October and 3,3 percentage points below the post-crisis peak recorded in April 2013. This decline is generalized across the different age groups and genders. Even long-term unemployment "continues to fall, although it remains above the pre-crisis level".
The information obtained from the surveys, concludes the document, point to continued growth in employment in the coming period, and the presence in some countries and sectors of growing signs of labor shortages.
