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The Association of Three Leading European Economic Institutes - [Germany's leading economic institute, the Ifo Institute at the University of Munich, the French INSEE (Institut National de la Statistique et des Études Économiques) institute, which is also the national statistics office and the Italian ISAE (Istituto di Studi e Analisi Economica) institute] said in its quarterly Eurozone Economic Outlook today that Eurozone real GDP growth recovered in Q3 after the disappointing performance in Q2. However, growth perspectives have deteriorated in response to the less supportive environment: the financial market turmoil has been persisting and inflation increased with the latest surge in oil and food prices. Real GDP is expected to expand at lower rates (0.5% in Q4 2007 and 0.4% in both Q1 and Q2 2008). Industrial production is forecasted to weaken after the strong performance in Q3, as indicated by the deterioration of Eurozone business surveys. Private consumption is stimulated by the labour market's steady improvement, but the recent rise of food and energy prices has a dampening impact. The annual GDP growth is forecast at 2.0% in Q1 2008 and 2.1% in Q2 2008 - compared with an expected outturn of 2.7% in 2007. Consumption should have grown by 0.5% in Q4 2007, followed by 0.4% in Q1 and Q2 2008. Investment is expected to expand at a moderate pace, with rates of 0.7% in Q4 2007, 0.5% in Q1 2008 and 0.6% in Q2: the investment cycle seems to have peaked. On the assumption that oil prices stabilize at USD 90- 95 per barrel of Brent and that the dollar/euro exchange rate fluctuates around 1.45 over the forecast horizon, inflation should peak at 3.0% in Q1 2008, before easing to 2.8% in Q2. If the negative shocks that affected the Eurozone economies were to fade out progressively, the economic slowdown may be only transitory, according to the institutes. © Copyright 2007 by Finfacts.com |
