Euro Zone Economic Survey Highlights - January 2012

Survey date: January 9th, 2012

n The council’s January 12th meeting, which occurred after our survey deadline, produced the expected decision to leave policy rates on hold for now. The panel suggests that the bank is likely to remain on hold in February too. But the statement accompanying January’s decision left the door open for further rate cuts in the future, possibly at the bank’s March meeting.

n The euro has continued to slide against the dollar over the past month. European economic news has generally presented a weak contrast with the more positive economic data from the US. But while these trends could well undermine the euro further in the near term, the panel expects the single currency to end the year at around US$1.30/€.

n Growth projections for 2012 have continued to slump, with the consensus now expecting regional GDP to contract by 0.3% this year.

n The decline reflects a broad-based deterioration in projections for all of the major expenditure components. But forecasts for fixed investment and exports have been hit particularly hard as fears of a regional credit crunch have continued to mount.

n Forecasts for 2013 have been included in our survey for the first time this month. A comparison of these forecasts with the 2013 projections from our previous long term survey in October 2011 suggests that sentiment regarding GDP growth prospects for next year has also deteriorated quite sharply in recent months.

n This month’s update of our panel’s long term forecasts suggests that economic activity will remain relatively subdued in 2014-16 as well.

More detailed results and commentary are available to members in the Members' Area

Forecasts are % change on preceding year unless otherwise noted	Forecasts*
	2012	2013
GDP Growth	-0.3	1.0
Inflation	1.8	1.7
3 Month Interest Rates (%, end period)	0.89	1.51
US$/€ (end period)	1.297	1.278

* Forecasts are the average (mean) predictions of our panel of leading financial institutions based in the Euro Area. The members of the panel are Allianz, Bank of America Merrill Lynch, BBVA, BNP Paribas, Citigroup, Commerzbank, Danske Bank, Dresdner Bank, Dun and Bradstreet, DZ Bank, The Economist Intelligence Unit, ETLA, G&P Institutional Management, Grupo Santander, Handelsbanken, HSBC, IHS Global Insight, ING Financial Markets, Intesa Sanpaolo, J P Morgan Chase, Lloyds TSB Financial Markets, Moody's Economy.com, Morgan Stanley, Nordea, Oxford Economics, Raiffeisen Zentralbank, SEB, Societe Generale, UBS, and UniCredit MIB.