European economy guide

Nov 13, 2015

THE 19-strong euro area has been doing rather better of late. Growth picked up to 0.5% in the first quarter of 2015, slowing only a little to 0.4% in the second quarter. The euro area has been benefiting from a double fillip. First, the fall in energy prices caused by the collapse in the oil price has acted in much the same way as a tax cut, boosting consumer spending - the main engine of the recovery. Second, the European Central Bank has been conducting quantitative easing – creating money to buy financial assets – since March. Among other things this has kept the euro weak, helping the traded sector of the single-currency economy and contributing to a big current-account surplus of 3.7% of GDP in 2015.

Looking ahead, the euro area is likely to maintain a steady if unglamorous pace of recovery. That reflects two conflicting forces. On the one hand, the slowdown in China and emerging economies, which account for a quarter of euro-zone exports, will hurt exporting companies. Germany will be particularly affected since the Chinese market has been a lucrative one for its exports of investment goods and luxury cars. Already, German industrial orders have been falling while industrial production declined in the third quarter. On the other hand, the European Central Bank is poised to loosen monetary policy still further when its governing council meets in December. And spending on refugees, especially in Germany, will provide a modest fiscal stimulus.

Our interactive graphic (updated November 6th 2015) enables readers to inspect the health of European economies (including the nine member states of the European Union that do not belong to the euro) in a variety of ways, including data on jobs and the public finances as well as GDP.

Source: The Economist