This week has been a busy one, especially for the Eurozone. Yesterday European GDP figures came in at 0.6% for Q4, and 2.7% annualized. Both headline figures hit forecasts right on the nose which just further confirms what we already knew. “While detailed breakdowns have yet to be released, it seems that the Eurozone economy continues to fire on all cylinders. Investment has yet to fully recover from the crisis but has been an essential contributor to growth during the year. Economic growth has shifted to a substantially faster growth path over the course of 2017, and current GDP data confirms that,” commented Bert Colijn, economist at ING Bank.
He continued to say that the “Eurozone growth for 2017 as a whole was stronger than many advanced markets, like the US and UK for example.” GDP headline figures for the Eurozone were at 0.3% in the Q2 of 2015 and stayed below 0.5% all the way till Q4 of 2016. But – since then, GDP figures remained upbeat, coming in at 0.6 or more for each of the last five quarters. This is one of the main reasons for the build-up of expectations around the ECB considering various strategies to begin tapering Quantitative Easing. This notable growth in the Eurozone has outpaced that of the US. In Q4, the U.S economy grew by 2.6% annualized. The Eurozone beat that by a mere 0.1% with a headline figure of 2.7%.
“However, the big question for 2018 is whether the stronger euro will offset the effects of improving external demand. The high growth in Q4 means that the carry-over effect for 2018 is very favourable. We expect Eurozone GDP growth to come in at 2.4% again this year,” as per Mr. Colijn. If we see this global growth persist, there might be considerable shuffling that will need to take place; the ECB might have to hold back on stimulus while the Federal Reserve might have to slow down interest rate hikes. “Still, with businesses indicating that new orders continue to increase it seems to be a safe bet that the Eurozone economy will continue to perform well in the months ahead,” Mr. Colijn concluded.