Improvement in euro area domestic demand in near future

A confluence of supportive factors, including lower oil prices, a weak euro, improving financial conditions and benign inflation creates a favorable environment to increase household spending in euro area. The household spending expected to increase by a further 0.4% q/q on average through 2016, says Barclays.

However, confidence data for October indicates it is unlikely to accelerate much as consumers seem to be turning increasingly concerned about future labor market developments.

This is particularly observed in Germany where unemployment expectations have been started increasing recently, similarly, in France they are remained broadly stable around high levels and, to a lesser extent, in Spain where they have recently started to rise, albeit from low levels. Against this weak backdrop, sentiment about future labor market prospects is close to all-time lows in Italy, notes Barclays.