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The Euroboom

Following disturbing forecasts heading into 2017, the Eurozone’s economy advanced 2.6% in the third quarter, surpassing the preliminary estimate of 1.6% before the year began. The Euroboom deceived various pessimists, who believed Brexit and Trump’s presidency would obstruct the Euro area from accomplishing its initial 1.6% GDP target. Several factors have caused the Euroboom.

Source: tradingeconomics.com

Industries

Factories have picked up the pace. Their production levels increased by 3.2% from this time last year, the highest since the 2008 recession. Increased production has catapulted higher investments in the Euro area, increasing profit margins and ultimately lower unemployment due to more workers being hired. The result of this was exemplified by the Eurozone’s lowest unemployment figures since February 2009. This time last year unemployment was at 10% but has since dropped to 9.1%. Increased investment directly increases aggregate demand and GDP growth, whilst a decrease in unemployment directly increases aggregate supply, which increases real output further. The improvement of industries, therefore, explains why the Eurozone achieved an above-target growth rate.

Source: ec.europa.eu/eurostat

It's countries

·         France: growth increased from 1.8% to 2.3%. President Macron’s labour reforms made it easier for small or medium-sized banks to hire and fire workers more easily, to boost employment.

·         Germany: growth increased from 2.3% to 2.8%. German businesses continue to be subsidised by the government to reduce working hours.

·         Italy: growth increased from 1.5% to 1.7%. Gross fixed investment made the largest contribution to growth, as well as household consumption and net trade.

·         Spain: growth stayed the same at 3.1%: Despite still having high unemployment (17%), employment is increasing at 2.8% annually, with the creation of almost 500,000 full-time jobs since last year.

The Eurozone’s boom has been a success story across Europe, and the Euro currency is now up by 1.4%. The exchange rates for the Euro are £1: €1.11, and €1: $1.18.