European Commission Cuts Growth Forecast for Euro Zone as Trade Tensions Rise By

© Reuters.  European Commission reduces GDP forecast for euro zone to 1.9% in 2019

© Reuters. European Commission reduces GDP forecast for euro zone to 1.9% in 2019 – The European Commission lowered its growth forecast for the euro zone in 2019 as trading tensions rise and the global economy weakens.

The Commission expects growth to moderate from the 10-year high of 2.4% seen in 2017 to 2.1% this year and then further decline to 1.9% in 2019, compared to its prior projection of a 2.0% expansion.

“Fading world trade growth, rising uncertainty and higher oil prices should have a dampening effect on growth in general, while economic activity should also weaken as labor market improvements slow, slack diminishes, and supply side constraints become more binding in certain Member States,” the Commission explained in the report.

“The extraordinary impulse from the rebound in global growth and trade enjoyed by the European economy last year is already wearing off, as the outlook for global growth is weakening and trade tensions have risen,” it added.

While the projected slowdown may be of concern to the European Central Bank as it winds down its asset purchase program at the end of the year, the Commission did lift inflation expectations to 1.8% for this year and next from its prior estimate of 1.7% for both years, moving the level closer to the euro zone monetary authority’s objective of below, but close to, 2% over the medium term.

The euro received some relief from the report, pulling off intraday lows after the publication. At 5:33 AM ET (10:33 GMT), was down just 0.05% at 1.1421.

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