The figures released in the past week show eurozone GDP grew by a better than expected 0.5% in the last quarter of 2016, up from 0.4% in the previous quarter.
This puts the figure for the whole of 2016 at a not-too-shabby 1.7%.
Economic growth is a building block for equities returns, and while it far from guarantees anything, it is encouraging for investors that growth has been sustained at something approaching a healthy rate over the past two years despite all the geopolitical uncertainty stemming from Brexit, among other things.
The big point of concern however, is the potential impact of the withdrawal of the ECB’s QE programme. The sting in the tail of today’s data read-out was the inflation figure. At 1.8% it is barely beneath the ECB’s 2% target, and with inflation hard to rein in if central bank’s act too late, tightening by Mario Draghi and co could come in quicker than markets are anticipating.
"The sting in the tail of today’s data read-out was the inflation figure. At 1.8% it is barely beneath the ECB’s 2% target"
According to Architas senior investment manager Nathan Sweeney, the positive numbers for the eurozone are indicative of opportunities for investors, rather than a reason for concern though.
“These latest growth figures are another positive sign for the eurozone, despite much of the negative sentiment surrounding the continent. If you were to remove the political instability you would be left with a region that is undergoing a real recovery with unemployment coming down, albeit slowly, inflation picking up and growth firming. It is not so long ago that the investment world was concerned about deflation in the eurozone and negative bond yields were widely accepted. This is no longer the case.”
