The euro zone economy is on a solid run, with a string of good data pointing to a consumption-led recovery, but investment is still lagging so it is far from clear if forecasts need to be revised, ECB policymaker Yannis Stournaras said.
Employment, sentiment and Purchasing Managers’ Index surveys have been beating expectations in recent weeks, reducing the downside risk to the ECB’s economic forecasts and fuelling calls for the bank to consider reducing its extraordinary stimulus.
“We are pleased of course with the string of new data, which show that the labor market developments are benign and consumption is growing,” Stournaras, the Greek central bank governor told Reuters.
“We’ve had the resumption of consumption, so we can talk about consumption-led growth, both in the euro zone and outside.
“But the problem remains that investment is stagnant and it’s not enough to have consumption-led growth,” he added. “These are good data. But they are not sufficient yet to guarantee a change in our position.”
Although market turmoil following the U.S. election could upset the recovery, ECB officials, including chief economist Peter Praet quickly tried to calm fears, saying temporary volatility is normal and the ECB would look past such swings.
Stocks rallied on Thursday and bond yields rose, suggesting that markets were taking President-elect Donald Trump’s victory in Tuesday’s election in their stride.
But Stournaras downplayed the impact of the better-than-expected economic data on policy, arguing that figures from one or two months do not necessarily indicate a shift in trend.
He said the euro zone’s central bank will look at all the evidence in December to determine if it needs to act.
“I don’t want to jump ahead (about QE). Let’s have the evidence first. And then we’ll be able to formulate our position in a safer way.”
Contemplating an extension of its asset buys, now due to end in March, the ECB will meet in December to discuss various options including changes in the parameters of the bank’s 1.74 trillion euro bond-buying program.
Although lending growth appears to have leveled off, Stournaras said the figures still provided solid evidence on the effectiveness of the ECB’s policies.
“It is good evidence that we have credit growth again and it seems to be widespread,” Stournaras said. “It is very positive. It is growing. It’s very important compared to where we were a year ago or even a few months ago.