Euro Area – Growth Momentum is still on the up side

Corporate surveys in November show that the pace of growth is still accelerating in the Euro Area. This can be seen at the global level but also in every sector, notably in the manufacturing sector where the stronger momentum is consistent with a higher international trade dynamics. Surveys also show that employment is increasing rapidly and that nominal pressures remain limited.
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The situation has improved, so now is the time for reform

The situation is currently better in the euro area, so now is time to shake it up.
The long period of lackluster growth since 2011 led to a drop in potential growth. High unemployment and lack of investment dented the mainsprings of European growth. The euro area no longer has the same facility it had before the 2008 crisis to grow at an average pace of 2%. In the current circumstances, 2% looks close to the economic cycle peak, and the situation is even more stark in France, where growth stood at around 2% on average before the financial crisis, while the 2017 figure is poised to come to 1.8% at best. These figures along with statistics for 2018 are close to the cycle peak and we should expect growth to take a downturn from 2019 onwards. The role of economic policy should be to promote an improvement in potential growth to keep the economy on a stronger growth path over the long term.

Key areas for consideration. Continue reading