A rising tide lifts all boats

Survey data suggest that economic momentum among the major euro-zone economies has converged in 2017. Indeed, in April the spread between the Composite PMIs for Germany, France, Italy and Spain was the second lowest on record. Each economy has benefited from low borrowing costs, the competitive euro exchange rate and a pick-up in global demand growth. The buoyant surveys support our view that euro-zone growth will be an above-consensus 2.0% this year. But with few signs of increased price pressures, we think that the ECB will carry out its asset purchases as planned. And contrary to market expectations for an interest rate rise in 2018, we see rates being kept unchanged until 2019.