Euro area economic growth unlikely to accelerate much further from current pace, says Barclays

The euro area activity data have continued to be upbeat. The first quarter economic growth was confirmed at 0.5 percent sequentially. Portugal’s economy expanded by a record 1 percent quarter-on-quarter following an average of 0.7 percent in the second half of 2016. The flash PMIs will tell whether these affirm the baseline and latest indicators that business sentiment has flattened, and therefore growth is no expected to accelerate considerably further, noted Barclays in a research report. The euro area GDP is therefore expected to expand 1.7 percent to 1.8 percent in 2017-2018, widely unchanged from 2016, stated Barclays.

As was anticipated, the final April HICP data affirmed that most of the headline increase was driven by calendar-distorted core prices in the services sector. The inflation in the medium term is likely to continue with its moderate recovery in the forecast horizon.

“We continue to forecast headline/core HICP inflation to average 1.6 percent/1.0 percent and 1.3 percent/1.2 percent, respectively, in 2017 and 2018”, added Barclays.