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Cushman & Wakefield
AMERICAS EUROPE APAC GLOBAL APPENDIXECONOMIC DRIVERS
The economic recovery in the
Eurozone
continues to gain
momentum as political risk recedes following the French
presidential election. Although unemployment continues to fall,
there is little upward pressure on wages which should mean
the recent rise in inflation, due to energy prices, is temporary.
The lack of underlying inflationary pressure so far has led the
European Central Bank (ECB) to conclude that it is unlikely
to make any meaningful policy changes anytime soon but the
recent run of positive survey data, if sustained, could change
their view. In particular, there is no plan to increase interest
rates before further adjusting the pace of asset purchases,
which could taper as early as Q4 this year, and there are no
expectations of further liquidity operations – all of which is
supportive of growth in the near term.
Europe
The
UK
economy has performed better than expected
since the EU referendum in mid-2016, supported by healthy
consumer demand. However, there is growing concern over
how long this consumer resilience can continue given the
political uncertainty caused by the snap election in June—
which resulted in a weakened Conservative government—and
the commencement of Brexit negotiations. In addition, the
main impact from Brexit to date has been the 10% depreciation
in pound sterling which is helping to improve UK exporters’
competitive advantage relative to their European counterparts.
But Brexit is also pushing up inflation as costs get passed on
through the supply chain. Higher inflation is eating into real
wages which are now declining for the first time since 2014.
Even so, consumer spending still remains resilient although
there are concerns over how long this can continue.