Euro area GDP growth is set to weaken on back of the slowdown in China and other emerging markets. Analysts observe the euro area financial sentiment indicators drop significantly and especially German exports have suffered.
Besides the slowdown in China, the recent appreciation of the effective euro will also be a headwind to exports. Despite the above negative effects, GDP growth of the economy is projected at 1.4% in 2015 due, amongst others reasons, to a solid progress in private consumption, estimates Barclays.
Looking into 2016, the recovery is expected to strengthen further and forecast growth of 1.7%. Last month inflation again turned negative, driven by lower gasoline prices.
"However, the deflation is set to be temporary and analysts look for a sharp rise in inflation in Q4, as the drag from energy prices should start to fade. Looking into 2016, the core inflation is likely to be modest as wage pressure is likely to remain subdued and as a stronger EUR is foreseen", states Barclays.
