For a long while, investment had been the missing jigsaw piece in the Eurozone recovery puzzle and have finally gained momentum, contributing to the surprisingly strong growth performance of the entire Eurozone, according to analysts at ING.
Key Quotes
“The often criticised QE programme has gradually made its way into the real economy. In fact, low interest rates have been more supportive of investments in intellectual property than in construction. Also, the ICT investment recovery has gained momentum. These are all pieces of evidence that the ECB’s QE programme is not only growth supportive but also fostering the structural transition of the Eurozone economy.”
“Unlike many of the years since 2008, it appears that Eurozone policymakers might secretly hope that this year will never end. 2017 has been the year of strong growth revival. It has seen a recovery that has broadened across countries and sectors, on the back of stronger fundamentals, fading exit fears and ultra-loose ECB monetary policies. This recovery currently seems to get better by the day.”
“For a long time, investments were the missing piece in the strong Eurozone recovery. Even this has changed this year. Investments have contributed c.0.6ppt to quarterly GDP growth in the first three quarters of the year and previous estimates of investments in recent years have been adjusted upwards. Since 1Q13, investments have increased by a total of 16.8%.”
“The fact that investments have yet to recover is mainly because of the weak recovery in southern European economies. Huge declines during the crisis have yet to be made up for in Spain, Portugal, Greece and Italy. This is despite the fact that most of the periphery countries have recently seen positive developments in investments.”
“Contrary to received wisdom, the investment recovery is not mainly the result of more construction activity. In fact, the asset classes experiencing the largest investment growth are intellectual property and ICT equipment. However, this innovation and digital boost is not spread equally across all Eurozone countries. The more digital economies are also the ones that receive the most ICT equipment investment. The gap between leaders and laggards is widening, not narrowing.”
“Even though it is hard to derive a single causality between the ECB’s QE programme and the pick-up in investments, particularly investments in high technology, available data suggest that the ECB has given a helping hand to the urgently needed digitalisation in the Eurozone.”
“It is clearly not the ECB’s task to solve all the structural problems of the Eurozone. While many think that the extreme monetary stance only creates problems, the boost it gives to R&D investments in the Eurozone should not be ignored. Who could have thought that an organization as old-fashioned as the ECB could be supportive of state-of-the-art investment?”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD stabilizes near 1.0800 as trading action turns subdued
EUR/USD holds steady near 1.0800 on Thursday and remains on track to end the day in negative territory following upbeat macroeconomic data releases from the US. The action in financial markets turn subdued as trading volumes thin out heading into Easter holiday.
GBP/USD extends sideways grind above 1.2600
GBP/USD fluctuates in a narrow channel above 1.2600 on Thursday. The better-than-expected Initial Jobless Claims data from the US and the upward revision to the Q4 GDP growth help the USD stay resilient against its rivals and limits the pair's upside.
Gold pulls away from daily highs, holds above $2,200
Gold retreats from daily highs but holds comfortably above $2,200 in the American session on Thursday. The benchmark 10-year US Treasury bond yield stays near 4.2% after upbeat US data and makes it difficult for XAU/USD to gather further bullish momentum.
XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC
XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase.
Portfolio rebalancing and reflation trades emerge into Q2
Yesterday’s price action pointed at a possible end-of-quarter portfolio rebalancing as the session saw the laggards of the quarter like Apple and Tesla gain, and the stars like Microsoft and Nvidia retreat.