News ID: 231009
Published: 0702 GMT September 08, 2018

Euro-area economy gets boost from investment, consumer spending

Euro-area economy gets boost from investment, consumer spending
KRISZTIAN BOCSI/BLOOMBERG

Consumer spending and business investment kept the euro-area economy humming along in the second quarter, with the wheels greased by the European Central Bank’s ultra-loose monetary policy.

Capital spending added 0.3 point percentage points to GDP in the period, helping to offset a negative drag from net trade. There was also support from households, government spending and inventories, according to Bloomberg.

Overall, growth in the 19-country bloc clocked in at 0.4 percent during the period, matching a previous estimate from statistics office Eurostat.

Having experienced its fastest growth in a decade in 2017, the euro-area economy has lost some momentum so far this year. It may weaken further amid global trade dispute, rising protectionism and knock-on effects from political instability in places ranging from Turkey to Italy.

The ECB’s record-low interest rates and asset purchases have given additional help the economy by fostering spending and employment gains. But that support will soon change, with policy makers planning to begin winding down parts of their stimulus from next month.

In the meantime, a full-blown trade war could negatively affect business sentiment and thereby stifle investment. Carmakers including Volkswagen, Daimler and BMW have warned about the fallout.

In what could signal the state of affairs deteriorating, President Donald Trump told Bloomberg last week the European Union, with which the US has agreed a truce on countervailing duties, was “almost as bad as China, just smaller.”

Already, some numbers point to weakness heading into the second half of the year. Company expectations about business prospects have dropped to their lowest in two years and Germany has reported declines in both factory orders and industrial production in July.

   
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