Euro Area growth and inflation remain subdued, triggering more monetary stimulus | The Conference Board
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Euro Area growth and inflation remain subdued, triggering more monetary stimulus

April 2016 | Economy Watch Reports

The growth rate of The Conference Board Leading Economic Index® (LEI) recovered somewhat following a temporary setback due to the turbulence in stock markets early in 2016—but it continues to hover around its long-term average. Industrial production growth gained some traction, while the overall labor market keeps improving.

However, as labor costs rise while productivity growth is stagnant, Europe's cost competitiveness appears to be declining. Despite rising labor costs, persistently low inflation triggered another hefty dose of ECB monetary stimulus amid increasing uncertainty over the Euro Area outlook. But monetary stimulus alone cannot fix Europe’s economic problems, as witnessed by the euro crisis of 2011/2012 and its aftermath. Fiscal repair and structural reforms following the crisis were difficult, but the bitter medicine appears to have worked for most countries and the systemic euro crisis seems to be history. Reform momentum however has slipped somewhat and become more uneven with further progress in some countries such as Italy, a steady pace of adjustment for the Eurozone as a whole, and a major setback in Greece.



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