European Commission Slashes EU Growth Rates

EC economists announced:

The European Commission’s autumn forecast projects weak economic growth for the rest of this year in both the EU and the euro area. Real GDP growth is expected to reach 1.3% in the EU and 0.8% in the euro area for 2014 as a whole. Growth is expected to rise slowly in the course of 2015, to 1.5% and 1.1% respectively, on the back of improving foreign and domestic demand. An acceleration of economic activity to 2.0% and 1.7% respectively in 2016 is expected to be driven by the strengthening of the financial sector (following the comprehensive assessment by the European Central Bank and further progress towards the Banking Union), as well as recent structural reforms starting to bear fruit.

If the EC counts on central bank contributions, it may find that neither the quantitative easing of the U.S. Federal Reserve nor the tremendous injection from the Bank of Japan into its economy has spring-boarded a recovery.

EC economists added:

The EU’s recovery appears weak, in comparison to other advanced economies and with respect to historical examples of post-financial crisis recoveries, even though these too were typically slow and fragile. Over the forecast horizon, domestic demand should benefit increasingly from the very accommodative monetary policy, the progress made in reducing private debt burdens and the broadly neutral fiscal stance. Private investment should recover gradually, also benefitting from improving demand prospects and catching-up effects, though initially held back by ample spare capacities. Private consumption is set to expand moderately in 2015 and 2016, supported by low commodity prices and rising disposable incomes, as the labour market gradually improves. Public consumption is expected to contribute marginally to growth. Against the backdrop of a moderate expansion of world trade, net exports are likely to contribute only marginally to GDP growth over the coming years.

Consumers, probably worried about another slowdown, have and will pull in their horns. And low commodity prices may not last terribly long.

ALSO READ: The 10 Most Livable Countries