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Patrick Artus, Research Analyst at Natixis, notes that the consensus expects only a very small fall in growth in the euro zone in 2019.

Key Quotes

“Could the situation be worse and growth fall abruptly? What could cause this?

  • A sharp rise in interest rates? Probably not, given the ECB’s very cautious policy and the weak reaction of euro interest rates to the rise in their dollar counterparts;
  • An increase in labour costs that drove down corporate profits and led to a downward correction in investment? There is no sign of labour costs accelerating at present in the euro zone;
  • Hiring difficulties for companies as the unemployment rate returns to the vicinity of the structural unemployment rate? These hiring difficulties are present, but they do not seem to be curbing employment to any great degree, at least for the time being. But they are a serious threat, just apparently not in the short term;
  • There remains the question of oil prices, which have risen sharply over the past year, with a very negative impact on real wages and, as a result, household demand. The loss of real income in the euro zone due to the year-on-year rise in oil prices amounts to around 1.5 percentage points of GDP.”