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The Conference Board Economics Watch: Europe Brief – January 2019

Video Transcript
Partially Transcribed and Completely
Edited by Glenford S. Robinson

00:05 Hello, I’m Klaus De Vries, Associate
00:08 Economists at the Conference Board, and
00:09 this is your January Economics Watch
00:12 Brief for Europe. What can we expect from
00:15 growth this year? The Euro area economy
00:17 will continue to moderate which is
00:20 mostly related to a weaker global growth
00:22 environment; domestic demand is stable.
00:25 It’s just over 1.5 percent annual growth.

00:28 We don’t expect this to change
00:30 substantially this year as the labor
00:32 market as well as business lending
00:34 conditions are still favorable. The
00:37 European Central Bank has signaled it is
00:39 committed to keep monetary policy
00:41 accommodative, and the first rate hike is
00:44 only expected towards the end of 2019 or
00:47 later, which European economies posed the
00:50 biggest risks while Germany posted
00:53 negative growth in the third quarter.

00:55 This was mostly due to temporary factors
00:57 such as the bottlenecks in automotive
00:59 production as well as adverse weather
01:02 conditions; as these factors subside,
01:05 the German economy will return to a more
01:07 solid growth path. This is a reassuring
01:10 perspective for the entire Euro area and
01:12 especially for neighboring economies,
01:14 such as the Netherlands, Austria, and
01:17 Denmark. Civil protests in France in
01:21 November and December over economic
01:23 reforms may weigh heavily on the growth
01:26 results for the final quarter of 2018.

01:29 A resolution of the protest should lead
01:32 to a French economy resuming its growth
01:34 path in the first quarter of 2019
01:37 on-wards in Italy while the dispute
01:40 between Rome and Brussels regarding the
01:42 public budget has subsided, the economy
01:45 is not expected to bounce back. The risks
01:48 of a downturn in 2019 have increased in
01:51 contrast to the more stable outlook
01:53 elsewhere in Europe; the same may be
01:55 assumed for the United Kingdom
01:57 especially in case a no-deal Brexit is
01:59 not avoided.

02:01 Despite the moderate outlook, the
02:04 unemployment rate in the Euro area has
02:06 remained stable at 8.1 percent,
02:08 since the summer of 2018.
02:11 With unemployment reaching a decade low,
02:14 companies feel the pain of talent
02:16 shortages, especially in an aging labor
02:18 market. Sectors, such as pay-rolling
02:21 transportation, and computer services are
02:24 among the worst affected by labor
02:26 shortages. As the economy keeps growing
02:29 above its potential rate, we don’t expect
02:31 these shortages to fade away in 2019.
02:34 Consequently, wage pressures have been
02:37 rising in recent months and are likely
02:38 to impact on business profitability. I am
02:42 Klaus De Vries, and this was your Economics
02:45 Watch Brief for Europe.

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