Euro area economy likely to expand 2.5 pct in 2018, domestic demand to drive economic growth - Barclays

The euro area economy is expected to expand stronger than initially projected in 2018, taking stock of the ongoing strength of the economic growth, as shown by available hard data for the fourth quarter and the latest business surveys, noted Barclays in a research report.

The euro area GDP is expected to expand 2.5 percent this year after the likely 2.4 percent growth seen in 2017. Domestic demand is expected to have remained the main growth driver, along with consumption expenditures and gross capital formation. Meanwhile, net exports are expected to have contributed positively to the headline economic growth, boosted by the strength of global trade. The economy is expected to grow 2 percent in 2019, with the economy gradually decelerating as the cycle matures, stated Barclays.

Meanwhile, inflation is expected to accelerate higher this year, owing to the recovery in energy commodity prices, with Brent crude oil prices having risen 13 percent through the forecast horizon. According to Barclays, headline inflation is expected to come in at 1.7 percent this year and in next year and reach 1.8 percent by the end of 2019. In February 2018, inflation is expected to decelerate to 1.2 percent, thanks to the base effects; however, it is likely to reaccelerate in March and come in at 1.9 percent in the third quarter. Core inflation is expected to come in at 1.25 percent in 2018 and 1.5 percent next year, added Barclays.

At 16:00 GMT the FxWirePro's Hourly Strength Index of Euro was bearish 96.6821, while the FxWirePro's Hourly Strength Index of US Dollar was highly bearish at -126.629. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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