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Behind the headlines of the crisis in Greece, the eurozone's economy has produced some encouraging indicators in 2Q15, suggesting that it is moving into a phase of sustainable economic growth. GDP is forecast to grow by 0.5% quarter-on quarter (QOQ), and by 1.5% year-on-year (YOY) in 2015, which would be better than the 1.3% growth forecast at the start of the year. Encouragingly, the consumer sector remained buoyant in 2Q despite a rise in inflation, suggesting the recent growth is sustainable and not purely driven by the fall in energy prices. Monthly export data has also been strong despite the slowdown in emerging markets, as the weak euro has improved the competitiveness of eurozone goods. There are also tentative signs of strengthening in the labor market, with the number of people in full-time employment growing again and expected to increase by 0.8% YOY in 2Q15. As a result unemployment has been edging down, falling from 11.5% at the end of 2014 to 11.1% at the end of the quarter; however, in Southern Europe the rate remains much higher.
The challenges posed by the situation in Greece will inevitably cloud over the eurozone's progress in the coming weeks and months. The eurozone is in a much stronger position to resist contagion than in 2010, partly due to the tools available to the ECB to limit contagion risk through Quantitative Easing (QE) bond purchases and the Outright Monetary Transaction (OMT), as well as through the scaling back of foreign direct exposure to the Greek economy, which has been taking place since the previous crisis. As a result the market reaction to the escalation of the crisis has so far been relatively subdued; bond yields in peripheral markets have moved out marginally but remain well within normal territory and substantially below the levels seen at the height of the previous crisis.
Source : UBS AG
