Europe’s Growth Steadier While Politics Raise Doubts

The economy may be showing signs of strength this year, thanks in part to the European Central Bank’s massive bond-buying program. But politically, Europe is struggling. And we can thank Greece for that.

The forecast for gross domestic product growth for Europe is much stronger this year than it was in 2014 – Fitch says 1.6 percent growth for 2015-2017 thanks to lower oil prices, weaker currency and an ultra-loose monetary policy. Plus manufacturing is picking up, auto sales are in the double digits in markets like Spain, while employment is slowly moving lower.

The main reason? The ECB’s trillion euro quantitative easing program and the structural reforms that several countries have adopted in response to the euro zone’s economic crisis have helped improve Europe’s growth prospects. For example – labor market reforms led by Prime Minister Matteo Renzi is starting to feed through to Italy’s employment figures. Meanwhile Spain’s economic reforms have pushed housing prices up and its employment rate lower.

Inspired by the uptick in economic data, the weaker euro and ECB President Mario Draghi’s dovish commentary, investors have been buying European stocks – the Europe Stoxx 600 index is up 12 percent in 2015. Goldman Sachs earlier this summer raised its outlook on European equities to overweight.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza