Eurozone: Strong growth to continue into 2018 – Deutsche Bank

Analysts at Deutsche Bank expect strong growth in the Eurozone to continue into 2018, but this pace is unlikely to be sustained for very long after the growth came in stronger than expected, with 2017 growth nearly a full pp higher than foreseen a year ago.

Key Quotes

“Eurozone to record strongest growth in a decade in 2017, showing resilience to political uncertainty

− 2017 GDP growth almost 1pp higher than

− Unprecedented political uncertainty did not result in material macro impact

− Domestic demand fuelled by market recovery, capex driven by pent-up demand, exports helped by strong global growth

− ECB maintained easy, stable financial conditions”

“See strong growth in 2018, but slowdown inevitable

− Initial signs of inflation pick-up as economy grows above potential (e.g., wages, upstream prices rising)

− Credit dynamics at odds with continued strong domestic demand growth

– Either spending slows, or bank lending accelerates, or both

− Gap between very strong manufacturing sector and robust services sector, normally closing with deceleration in manufacturing sector”