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EUROPEAN COMMISSION CONFIRMS WEAK GROWTH FOR EU

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EU commission reports on slow growth. Trade indices on STOCK.com

EUROPEAN COMMISSION CONFIRMS WEAK GROWTH FOR EU

Nov 4 2014, 11.59am GMT

Stock.com

The European Commission's autumn forecast projects weak economic growth for the rest of this year in the euro area.

  • Real GDP growth is expected to reach 1.3% in the EU and 0.8% in the euro area for 2014
  • Growth is expected to rise slowly in the course of 2015, to 1.5% and 1.1% respectively
  • An acceleration of economic activity is expected in 2016 to 2.0% and 1.7%

The headline news for most is that the ‘European Commission slashed its economic outlook for the eurozone on Tuesday, predicting the currency bloc would grow only 1.1 per cent next year, down from a 1.7 per cent forecast just six months ago.’

The forecast, that extends over two years, is a correlation of 180 variables with analysis from DG ECFIN country desks, using models and expert knowledge on the aggregate of the data of the individual member states.

Jyrki Katainen, European Commission Vice-President for Jobs, Growth, Investment and Competitiveness, said: "The economic and employment situation is not improving fast enough. The European Commission is committed to use all available tools and resources to deliver more jobs and growth in Europe. We will put forward a €300 billion investment plan to kick-start and sustain economic recovery. Accelerating investment is the linchpin of economic recovery."

The European Commission statement revealed that ‘the economic recovery that started in the second quarter of 2013 remains fragile and the economic momentum in many Member States is still weak. Confidence is lower than in spring, reflecting increasing geopolitical risks and less favourable world economic prospects. Despite favourable financial conditions, the economic recovery in 2015 will be slow. This reflects the gradual fading of the crisis legacy with still high unemployment, high debt and low capacity utilisation. The European Central Bank’s recent comprehensive assessment has reduced uncertainties about the soundness of the banking sector and improving financing conditions should help with the pick-up in economic activity. In 2016, strengthened domestic and foreign demand and a continuation of very accommodative monetary policy associated with low financing costs should further strengthen growth.’

Projections for the next 2 years from the European Commission

  • Domestic demand should benefit increasingly from the very accommodative monetary policy.
  • Private investment should recover gradually, benefitting from improving demand prospects and catching-up effects, though initially held back by ample spare capacities.
  • Private consumption is set to expand moderately in 2015 and 2016, supported by low commodity prices and rising disposable incomes, as the labour market gradually improves.
  • Net exports are likely to contribute only marginally to GDP growth over the coming years.
  • Labour market conditions improving only slowly.
  • Inflation is set to remain very low in 2014, projected at 0.6% in 2014, 1.0% in 2015 and 1.6% in 2016.
  • Government deficits are forecast to continue falling over the next two years, helped by strengthening economic activity.

European indices went down after the announcement – Germany30 from 9300 to 9212 (almost 1 percent), Italy40 from 19470 to 19150.

Germany30, trade Indices on STOCK.com

Italy40, trade indices on STOCK.com

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