Latest economic data signal a rebound in activity in the Eurozone – surveys signal 2.3% GDP growth – and we believe that growth in the second half will remain solid, with output growing above potential.
A main driver is domestic demand, which is improving, and the latest services PMI survey for the Eurozone is in line with this. Particularly positive is the fact that optimism in the services industry in peripheral countries remains solid, with the Italian PMI even advancing to 54.3 last month.
The same picture emerges from the manufacturing side, where sentiment seems to be undeterred by political uncertainties.
For the Eurozone as a whole, we expect domestic demand to continue being supported by an improving labour market (the unemployment rate is likely to continue to decline), while investment is likely to be helped by continuously low interest rates.
In addition, fiscal policy is a support for growth. Looking at regions, we note that German manufacturing data, as well as factory orders, suggest a solid rebound last quarter, following weak first quarter numbers.
Gero Jung – Chief Economist – Mirabaud AM