Eurozone, the economic growth is likely to remain solid

Economic growth in the Eurozone is likely to remain solid, though a future acceleration in activity seems unlikely.

We note the elevated level of PMIs, pointing to real GDP growth of 0.6% at the start of the third quarter, though optimism in the manufacturing sector slightly decreased in July, according to the flash estimates. Positively, employment sub-indicators continue to rise, pointing to an improvement in the unemployment rate, which remains high at 9.3%. With respect to the inflation outlook, we note the absence of price rises according to the PMI sub-component on prices charged.

This signals the absence of inflationary pressures and suggests a continuation of the ECB’s very accommodative monetary policy, including QE. In line with this view, the ECB recalled three conditions during its last press conference: (1) monetary policy needs to be persistent – by a durable and self-sustained inflation rate – (2) supported by confidence about its efficiency and (3) prudent with only a very gradual adjustment.

Gero Jung – Chief Economist – Mirabaud AM