Growing at a lower paceEuro-zone economic outlook - 4th Quarter 2010
Euro-zone GDP picked-up in Q2 (+1.0%), owing to the world trade dynamism and to a rise in domestic demand. Investment rebounded at a rate of 1.5% in Q2 due to improved business perspectives as well as to a weather-related postponement of construction investment in Q1 2010. GDP growth in the eurozone is expected to go back to lower pace over the forecast horizon (+0.4% in Q3, +0.3% in Q4 and +0.2% in Q1 2011). Private consumption would flatten (+0.1% per quarter), as the labor market is likely to remain fragile. Furthermore, the boost to income provided by the fiscal stimulus is to wane by Q4 in Germany, and is already counter-acted by fiscal consolidation in other euro-zone countries. Investment should increase further but at a slowing pace: foreign demand is loosing momentum and financial market uncertainty increased as a result of the recent sovereign-debt crisis while production capacities remain under-utilized and credit conditions are still restrictive. Moreover, construction investment in Q3 should be dragged down by the counter-effect of the sharp rise in Q2. Under the assumption that the oil price stabilizes at USD 77 per barrel of Brent and that the dollar/euro exchange rate fluctuates around 1.30 over the forecast horizon, inflation should edge down slightly by December 2010 to 1.7%.