A Cushman & Wakefield Research Publication - 2017 Global Forecast

GLOBAL

AMERICAS

APAC

APPENDIX

EUROPE

Europe

ECONOMIC DRIVERS The economic recovery in the Eurozone continues to gain momentum as political risk recedes following the French presidential election. Although unemployment continues to fall, there is little upward pressure on wages which should mean the recent rise in inflation, due to energy prices, is temporary. The lack of underlying inflationary pressure so far has led the European Central Bank (ECB) to conclude that it is unlikely to make any meaningful policy changes anytime soon but the recent run of positive survey data, if sustained, could change their view. In particular, there is no plan to increase interest rates before further adjusting the pace of asset purchases, which could taper as early as Q4 this year, and there are no expectations of further liquidity operations – all of which is supportive of growth in the near term.

The UK economy has performed better than expected since the EU referendum in mid-2016, supported by healthy consumer demand. However, there is growing concern over how long this consumer resilience can continue given the political uncertainty caused by the snap election in June— which resulted in a weakened Conservative government—and the commencement of Brexit negotiations. In addition, the main impact from Brexit to date has been the 10% depreciation in pound sterling which is helping to improve UK exporters’ competitive advantage relative to their European counterparts. But Brexit is also pushing up inflation as costs get passed on through the supply chain. Higher inflation is eating into real wages which are now declining for the first time since 2014. Even so, consumer spending still remains resilient although there are concerns over how long this can continue.

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