EU economic recovery set to continue
The EU Commission’s latest economic forecast includes an upwards revision for 2015 to a rise in real GDP of 1.8%, increasing to 2.1% for 2016 across the EU.
Alongside this, overall domestic demand is anticipated to grow more than in the previous year, helped, in part, by oil prices remaining relatively low and the continued depreciation of the euro. Historically, economic growth and an improving domestic sector are frequently linked to trading-up in retail markets. However, current trends suggest that shoppers remain price conscious after a period of low consumer confidence.
Germany has taken advantage of an improving labour market and increasing domestic demand, its strong growth from 2014 driving up the EU average and continuing to do so into 2016. Poland is also forecast to achieve above average growth, driven by strong investment and an improving labour market. However, domestic demand is expected to ease, in part due to ongoing tensions with Russia. France and Italy are expected to record growth as exports prosper and oil prices keep inflation low, relieving some pressure on household spending and pushing up domestic demand.
While the UK is forecast to see economic growth above the EU average, growth is expected to be at a slower rate than in 2014. Despite a combination of falling unemployment rates and increasing disposable household incomes, domestic demand growth is set to slow down over the next 18 months as investment and export growth slow.