Eurostat’s first flash estimate has put Q4 real GDP growth at +0.6% q/q. This means the Eurozone continued to expand almost as strongly as in the previous quarters. For 2017 as a whole, economic growth reached a respectable +2.5%. And there is also a good basis laid for 2018 – we continue to forecast GDP growth of at least +2.2%. Furthermore, the latest sentiment indicators and especially further rising capacity utilization in the Eurozone’s industrial sector contribute to the positive picture.
The current economic momentum shows in retrospective that the loose ECB monetary policy is having an effect (naturally with a time lag). Looking ahead, the current monetary policy stimulus – the ECB's balance sheet continues to grow – may be too strong. At last week’s Governing Council meeting the forward guidance was left unchanged. However, the ECB's easing bias appears no longer appropriate and is likely to be dropped soon. Starting in October, the monthly bond purchases should be scaled back from EUR30bn to zero.