ECB: there may be more positive surprises in short-term growth
The European Central Bank (ECB) considers that the strong cyclical moment of the eurozone economy can lead to new positive surprises in the short-term growth indicators, according to the bulletin of the entity published today.
The bulletin notes that the latest available information confirms a “strong pace of economic expansion” in the euro area, “which accelerated more than expected in the second half of 2017.”
In addition, it indicates that the robust growth, the current reduction of economic inactivity and the increase in the use of capabilities “continue to strengthen the confidence” of the Governing Council of the ECB that inflation will converge towards its objective, slightly below 2%. %.
The study states that the “current strong cyclical moment may lead to more positive short-term growth surprises” and points out that the risks “are broadly balanced” and continue to be mainly related to global factors, including the evolution of the currency markets.
It reiterates that the appreciation of the euro against the dollar and the recent volatility in the exchange rate represents “a source of uncertainty” that needs to be monitored in relation to its possible implications on the stability of prices in the medium term.
The entity notes that the economic analysis based on the latest data and surveys reflects a continuation of the “strong and generalized momentum” of growth in the change of year.
It emphasizes that private consumption is supported by the growth of employment, which is benefiting in turn from past labor market reforms, as well as by an increase in household welfare.
The investment continues to be strengthened thanks to the very favorable financial conditions, increasing the profit of the companies and a solid demand.
In addition, the widespread economic expansion is giving impetus to Eurozone exports.
The report considers that year-on-year inflation – which in December was 1.4% and November 1.5% – “will probably be at those levels in the coming months” if oil prices remain as they have been.
Core inflation -which excludes prices of fresh food and energy- “remains moderate and must still show convincing signs of a sustained upward trend.”
The bank expects both to grow gradually in the medium term supported by its monetary policy measures, the continuation of economic expansion, the corresponding absorption of economic inactivity and the growth of wages.
The recovery of credit growth to the private sector continues, supported by the increase in demand and the relaxation of credit standards, especially for households.
It also points out that the credit costs for non-financial corporations in the euro area continue to be favorable with the interest rates on their bank loans close to their historical minimum- site.