Lacklustre recovery in the euro zoneEuro-zone economic outlook - 1st Quarter 2010
The business climate is still below its historical average. Real GDP is forecasted to rise by 0.3% in Q4 2009, and by 0.2% in both Q1 and Q2 2010.In particular, the fading fiscal stimulus in the coming quarters, the restrictive credit conditions and the slack on the labour market will dampen growth. Industrial production is likely to expand only modestly. Although recent business surveys have further improved, the current business climate is still below its historical average. Private consumption is expected to rise by 0.1% in Q4 2009, 0.2% in Q1 2010 and 0.1% in Q2. While purchasing power could be stimulated by tax cuts, especially in Germany at the turn of the year, the unemployment risk should foster an increase in precautionary savings. Investment is expected to diminish further by 0.4% in Q4 2009 and by 0.1% in Q1 2010, followed by a rise of 0.2% in Q2. Investment activities should still suffer from the low degree of capital utilization. On the assumption that the oil price stabilizes at USD 75 per barrel of Brent and that the dollar/euro exchange rate fluctuates around 1.47 over the forecast horizon, inflation should move to 1.1% in both March and June 2010.