Eurozone likely to witness strong economic growth in 2018, says DZ bank
The Eurozone economy is expected to witness a strong growth going into 2018, according to a recent report from DZ Bank. The excellent mood in the Euro area and the United States continues unabated in the hectic pre-Christmas period. Surveys show that German industry is literally flying high, and the industrial climate for the whole of the currency union is also at an all-time high.
The consumer climate is also benefiting from a continuing downward trend in unemployment. In most advanced economies, sentiment in the services sector is also at a high level, albeit in most cases not quite as euphoric as in industry.
Since there are no signs of any major break in the growth trend in the Euro area and the USA, our forecasts remain unchanged. We still expect moderate growth to be sustained next year. Overall, global growth should pick up slightly, since the impetus from some emerging countries is increasing. Stronger economic growth in the USA contrasts with only a very slight deceleration in China.
The moderate growth rates in the global economy are still ultimately being safeguarded by the central banks’ expansionary monetary policy. This is particularly true of the European Central Bank, which has not even started to seriously normalize monetary policy yet. From January it will merely reduce the volume of bond purchases.
Conversely, after moderate interest rate rises since October, the Fed is already scaling back its significantly extended balance sheet. However, based on the generally subdued inflation outlook, there is no need to tighten monetary policy hastily, the report added.
Lastly, the parliamentary decision on planned tax reforms was still not “a done deal” at the publication deadline for this report. However, we believe that extensive tax cuts are virtually certain to be implemented. Even if it proves impossible to negotiate a draft agreement capable of consensus support, which would also achieve the necessary majority in the two chambers of Congress before New Year, this would happen at the latest during January, making it possible for President Trump and the Republican members of Congress to finally demonstrate visible success.
Source: FXWire Commentary