EY Eurozone Forecast September 2014 - Economic recovery will gain strength slowly


EY Eurozone Forecast
& Outlook for financial services

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Economic recovery will gain strength slowly

The Eurozone’s disappointing growth performance in the year to date reflects two separate dynamics that have been largely working against each other.

On the positive side, there are signs of reduced financial market fragmentation, supported by a continued decline in bond yields. Unemployment has stabilized, giving consumers renewed confidence to boost their consumption. There are also signs of renewed housing market activity and construction activity is rising.

Working against this has been a sustained appreciation of the euro exchange rate, which rose by nearly 10% on an effective basis between August 2012 and March 2014. The resulting loss in competitiveness has hit business sentiment this year and put a sizeable dent in manufacturing activity, especially in those countries that have been slow to undertake necessary structural reforms.

More recently, sentiment has been further adversely affected by rising geopolitical tensions, especially in Ukraine.