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2015 AUTUMN ECONOMIC FORECAST OF THE EUROPEAN COMMISSION

09.11.2015

2015 AUTUMN ECONOMIC FORECAST OF THE EUROPEAN COMMISSION

On 5 November 2015, the EU Commission presented the 2015 AUTUMN ECONOMIC FORECAST OF THE EUROPEAN COMMISSION. According to the document, the economic recovery in the euro area and the European Union as a whole is now in its third year and it should continue at a modest pace next year despite more challenging conditions in the global economy.  The study reports that against a backdrop of declining oil prices and a relatively weak external value of the euro, the economic recovery this year has been resilient and widespread across Member States. Overall, euro area real GDP is forecast to grow by 1.6% in 2015, rising to 1.8% in 2016 and 1.9% in 2017. For the EU as a whole, real GDP is expected to rise from 1.9% this year to 2.0% in 2016 and 2.1% in 2017.

In a nutshell:

Concerning the construction sector, the Autumn Economic Forecast states that after having fallen rather steadily since the recession in 2008-2009, the adjustment of construction investment is expected to come to an end this year, which should allow construction investment to gather pace in 2016 and 2017. However, recent hard data still point to a continued fall in construction investment. The sector's output has in August  fallen by 0.9% in the euro area and by 1.0% in the EU. The recovery in construction investment is expected to gather pace in 2016 and 2017, as the need for adjustment in that sector gradually fades. Support should mainly come from the relatively strong growth in household real disposable income, low mortgage rates, and a return to rising house prices. However, since these factors will continue to be partially offset in some Member States by high levels of household debt and remaining sluggishness in the non-residential construction sector, the rebound in construction investment should be moderate. Equipment investment is supported by improved profit margins, on the back of low energy prices, and low financing costs. It should increasingly benefit from a brighter demand outlook and a need to modernise the capital stock. Lower growth momentum outside the EU, however, will likely prevent equipment investment from becoming more dynamic in 2016 but stronger growth is expected in 2017 with the pick-up in global demand.

Referring to the labour market, it continues to strengthen at a slow and uneven pace across Member States. However, hard-hit countries that have implemented labour market reforms should see further gains in employment growth. In the euro area, employment is expected to grow by 0.9% this year and next, and to pick up to 1% in 2017. In the EU, employment is set to increase by 1.0% this year and 0.9% in 2016 and 2017. Overall, unemployment is expected to continue to decline only gradually, with substantial disparities between Member States. In the euro area, it is forecast to fall to 10.6% next year and 10.3% in 2017 from 11.0% this year, while in the EU as a whole, the forecast shows a fall from 9.5% this year to 9.2% and 8.9% in 2016 and 2017 respectively.

Inflation and oil. The document report that the steep fall in oil and other commodity prices drove headline inflation in the euro area and the EU into negative territory in September. Annual inflation is expected to rise from 0.1% in the euro area and 0% in the EU this year, to 1.0% and 1.1% respectively next year, and to 1.6% in both areas in 2017.

EU exports. “The outlook for global growth and world trade has deteriorated considerably since the spring, due to the downturn in emerging market economies, particularly China. Emerging market economies are expected to reach their trough this year and to start recovering in 2016. So far, euro area exports have largely been spared from the deterioration in global trade, mainly thanks to the euro’s past depreciation. However, export growth is expected to slow down in 2016 before rising slightly in 2017.

The 2015 AUTUMN ECONOMIC FORECAST: http://ec.europa.eu/economy_finance/publications/eeip/pdf/ip011_en.pdf