EARLIER this year, a genuine revival in the euro area appeared to be under way. European equity markets were buoyant and consumers had become more confident. The recovery, which had been faltering and feeble since the spring of 2013, looked set to accelerate. That bout of optimism has proved fleeting and there is now increasing doubt about whether the euro area can pull itself out of a rut of low inflation and sluggish growth. The European Central Bank (ECB) is not expected to act on September 3rd when its governing council meets. But it may well indicate a preparedness to provide more stimulus, if necessary.
Even before the recent panic in financial markets about the Chinese economic slowdown, the euro-zone recovery was losing momentum. After growing by 0.4% in both late 2014 and early 2015, GDP increased in the second quarter by 0.3%. Annualised, that was a pace of 1.3%, barely a trot compared with...Continue reading
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