The European economy revealed its autumn 2017 forecast in November. The economy is set to post real GDP growth of 2.2%, representing its fastest pace since the 2007-2008 financial crisis. Original projections in the spring had growth at 1.7% for the year.
Growth has been propelled by improved private sector performance and consumption, stronger global growth, and solid unemployment numbers. Low borrowing costs have also worked to draw foreign investment. The European Central Bank (ECB) has been reluctant to raise rates and the drawn down of its monetary stimulus is expected to be gradual.
As with other developed economies, wage growth and inflation continue to be the chief concern. Inflation is projected to average 1.5% in the Eurozone and drop to 1.4% in 2018.
Investors who are confident in the current trajectory for the Eurozone should take a look at the iShares MSCI Europe IMI Index ETF (TSX:XEU). The fund has climbed 14.7% in 2017 and 19% year over year. Some of its top holdings include Nestle SA and British multinational HSBC Holdings PLC.
Of course, concern still lingers over the ongoing negotiations regarding Brexit. The European Union and British representatives have been unable to come to an agreement with regards to the “divorce settlement”.
Prime Minister Theresa May’s Conservative majority has been under increased pressure of late. A solid performance from Labour in the 2017 U.K. election has opened up the possibility that the referendum could be challenged. There is now a little over a year remaining for the March deadline when Britain is slated to officially depart the European Union after triggering Article 50.
