Euro Zone Economic Survey Highlights - July 2010

Survey date: July 12th, 2010

n The ECB’s July meeting did not result in any changes in interest rates or liquidity policy. The panel does not expect a rate change at either of the bank’s next two meetings either.

n The euro has recovered a little over the past month, assisted by weaker than expected US economic data. But the panel predicts that with economic growth in Europe lagging behind that in the US, the euro remains vulnerable to further declines.

n 2010 forecasts for GDP growth have rebounded a little this month, mainly as a result of a recovery in investment projections after last month’s sharp fall. As was the case last month, the panel’s new forecasts suggest a stronger contribution from inventory accumulation, but a weaker one from the external sector.

n The consensus forecast for overall GDP growth in 2011 has slipped fractionally further this month, mainly as a result of weaker forecasts for government consumption. But projections for most other growth indicators have remained stable.

n Forecasts for industrial production growth in 2010 have again jumped sharply, as the second quarter surge in output has continued. This partly reflects stronger growth in regional exports. Output growth forecasts for 2011 have also risen, although to a lesser extent.

n The most encouraging news from this month’s survey is an improvement in the consensus forecasts for the regional budget deficit in both 2010 and, more significantly, 2011.