- Eurozone economy - happy with 2017 and hopeful for 2018
Despite political uncertainties, the Euro area economy performed well overall in 2017, with strong macroeconomic indicators.
The positive and broad-based growth figures reflected the good shape of the economy. According to Eurostat's latest available data, the Eurozone grew by 0.6 percent in the third quarter of 2017 compared to the previous quarter and by 2.5 percent compared to the same quarter of 2016.
In the 19-member Eurozone area, the seasonally adjusted unemployment data, which was 8.9 percent in September 2017, fell to 8.8 percent in October – the lowest rate since January 2009.
Furthermore, seasonally adjusted employment rose by 0.4 percent in the third quarter of 2017 compared to the second quarter and by 1.7 percent compared to the same quarter of 2016.
The final IHS Markit Eurozone PMI Composite Output Index registered its highest reading since February 2011 posting 58.1 in December, up from 57.5 in November.
The headline index has signaled growth for 54 successive months, with the average level during quarter four recording the best since the opening quarter of 2011.
The PMI data, which is also closely followed by the European Central Bank (ECB), noted the region's economy has entered the new year with good prospects, with support from countries like Germany, Ireland, Italy and Spain.
However, on the inflation side, positive developments have been limited. Inflation rates have risen slowly from very low levels but have not yet reached the desired target range.
In the Eurozone, the annual inflation, which was 1.5 percent in November, slowed to 1.4 percent in December.
The ECB clarified that, in the pursuit of price stability, it aims to maintain inflation rates below, but close to 2 percent over the medium term. To achieve this aim, the central bank is implementing measures including an asset purchase program and applying a low-interest rate policy.
Fluctuating inflation data has forced the European Central Bank authorities to pursue these measures.
ECB President Mario Draghi, along with the majority of members of the bank's Executive Council, stressed that these measures are still needed to achieve this inflation aim.
Responsible for carrying out the monetary policy in the region, the ECB continued its expansionary monetary policy as well as low-interest rates in 2017 and chose to extend the duration of its asset purchase program.
Benoit Coeure, an ECB executive board member in the November reading of the European Commission’s Economic Sentiment Indicator said that business and consumer confidence are at their highest levels for over 17 years. Seven million jobs have been created in the euro area since mid-2013.
“Growth today is not only very strong, but also very broad-based. The breadth of the expansion in terms of countries and sectors is greater than at any point over the last 20 years. The expansion is also more sustainable as it is driven by domestic demand and an improving labor market, and it is less reliant on credit,” Coeure said.
These positive developments in the Eurozone economy are expected to continue in 2018 and strengthen further with the implementation of structural reforms.
AA Frankfurt
