Euro area economy grows strongly in Q4 2017, likely to expand 2.5 pct on average in 2018

The euro area economy grew at a healthy pace during the last quarter of 2017. The preliminary estimate showed that the euro area economy expanded at a significant rate of 0.6 percent again on a sequential basis. This corresponds with the average growth rate in the last five quarters. Growth in the third quarter was upwardly revised from 0.6 percent to 0.7 percent, giving a plus of 2.5 percent for the full year in 2017. Moreover, the outlook for the first quarter of 2018 also appears promising, noted Commerzbank in a research report.

Meanwhile, economic confidence is quite characteristic of boom times. In the past, a purchasing manager’s index for the services sector of more than 56, as recorded in January, accompanied economic growth of 0.75 percent per quarter.

“Consequently, our forecast of a 0.6 percent rise in real GDP in the first quarter could still prove too cautious. We expect real GDP to expand by 2.5 percent on average in 2018, which is above the expectations of most economists (2.2 percent) and the ECB (2.3 percent)”, stated Commerzbank.

The upswing might possibly be hampered by a change of course by the ECB. But there is no sign of this. Although the European Central Bank would just spend EUR 30 billion on a monthly bond purchases up to September and then gradually stop purchases, this does not mean the end of loose monetary policy, said Commerzbank.

“Even if the ECB does raise its growth forecasts for 2018 in March, we do not expect a first ECB interest rate hike until 2019”, added Commerzbank.

At 16:00 GMT the FxWirePro's Hourly Strength Index of Euro was bearish -86.1792, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 38.9759. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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