Euro Area economic activity to accelerate further

World demand to the euro area grew by a meagre 0.3% q/q, while euro area exports were up 0.6% q/q. Monthly trade data available up to May showed some improvement, along with the export growth.

Growth generally remains constrained by the high level of debt in both the public and private sectors, while adverse demographic trends and structural impediments, such as labour market rigidity and a lack of competition in non-traded goods sectors, remain a major hurdle to further acceleration in activity.

Exports to the US and Japan have remained on a strong footing, while the decline in exports to OPEC, Russia and to a lesser extent China has moderated. In Q1, both investment and public consumption surprised to the upside. Gross fixed investment grew by 0.8% q/q, its strongest pace since Q1 11, as both construction and productive investment were up. 

"Although it may be premature to draw strong conclusions from that rebound, this could be related to the better growth outlook and to very easy financial conditions, which may eventually translate into some willingness to expand production capacity", Barclays.

This reflects an easing in the fiscal stance in some member states that were expected three months ago.